Weekly options have become a stalwart among options traders. Unfortunately, but predictable, most traders use them for pure speculation. As most of you know, I mostly deal with high-probability options selling strategies. So, the benefit of having a new and growing market of speculators is that we have the ability to take the other side of their trade.
I like to use the casino analogy. The speculators buyers of options are the gamblers and we sellers of options are the casino. And as well all know, over the long-term, the casino always wins.
So far, my statistical approach to weekly options has worked well. I start out by defining my basket of stocks. And I use it over various timeframes 2 , 3 and 5. This gives me a more accurate picture as to just how overbought or oversold SPY is during the short-term. A reading above 80 means the asset is overbought, below 20 means the asset is oversold. Just like my other high-probability strategies I will only make trades that make sense.
As always, I allow trades to come to me and not force a trade just for the sake of making a trade. I know this may sound obvious, but other services offer trades because they promise a specific number of trades on a weekly or monthly basis.
In our case, we would use a bear call spread. A bear call spread works best when the market moves lower, but also works in a flat to slightly higher market. Remember, most of the traders using weeklys are speculators aiming for the fences. They want to take a small investment and make exponential returns. If I lower my probability of success I can bring in even more premium, thereby increasing my return.
It truly depends on how much risk you are willing to take. Take the Apr14 strike. It has a probability of success Prob. And easily within the reach of regular investors. You can learn all about this safe, simple strategy — and the next three trades shaping up right now — by clicking this link here.
Slay your own dragon — Go here now. So how do I use weekly options? Once an extreme reading hits I make a trade. And this is where the casino analogy really comes into play. Take a look at the options chain below. I want to focus on the percentages in the far left column. Published by Wyatt Investment Research at www. Ian Wyatt Dividend Stocks. Copyright Wyatt Invesment Research.More...