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BUYING WEEKLY OPTIONS

by Amanda Harvey

Buying weekly options involves purchasing an options contract which is based on an underlying equity or stock. This contract gives the holder the right, but does not obligate them, to buy a certain amount of the underlying stock. The stock may be bought at a specific price, which is known as the strike price, on a pre-determined date called the expiration date. Buying the stock is referred to as exercising the option.

BUYING WEEKLY OPTIONS TO TRADE

Although the options can only be exercised on the expiration date, they may be sold to another buyer at any time during the life of the contract. Buying options contracts and then selling them again, ideally at a profit, is generally described as trading options.

Trading options is the main purpose of our trading alert service, offering suggestions for weekly options which are likely to increase in value within a short period of time. Our members then enter the trades by buying weekly options at or near a suggested price and then selling them again when a target profit has been achieved.



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LOOKING FOR CATALYSTS

Buying weekly options is an ideal way to trade options when there is a catalyst which is likely to cause a high level of price movement within a short period of time. This catalyst is often a report of earnings, sales, or the launch of a new product from the company itself. It can also be a general economic or news report that is expected to significantly impact the price of the company’s stock.

BUYING WEEKLY CALL OR PUT OPTIONS

Whether the price is expected to go up or down, it is possible to take advantage of this movement by buying weekly options. If the anticipated price change is upwards, then a trader would buy a call option which increases in value when the stock price rises. If the price is expected to drop dramatically, a put option is a way to capitalize on this price movement, as put options increase in value relative to the decrease in stock price.

WHEN TO BUY WEEKLY OPTIONS

Buying weekly options can be done up to six weeks in advance, as these options are listed six weeks prior to their expiration date. There are expiration dates available for weekly options every Friday, except for the third Friday of each month, as that is the expiration date for monthly options.

It is often advisable to buy a weekly options contract closer to the date around which the price movement is expected to occur. One reason for this is that all options contracts are priced on a number of factors including the amount of time value that they contain. This means that the price paid, or premium, is generally higher when an expiration date is further away. It makes sense in most cases to avoid paying a higher premium for time that is unnecessary.

BUYING FURTHER IN ADVANCE

The exception to this would be if you believe that very few people are aware of a catalyst that is going to happen a few weeks later. Closer to the date of this catalyst occurring, more people will become aware of the event, and this may well drive the price up, even before the event occurs. Buying weekly options further in advance may be a good choice in this type of scenario, as closer to the date the price to buy in could be a lot higher.

WINNING WITH WEEKLYs

When trading weekly options, you need up-to-the-minute knowledge of the events affecting the market, as well as an understanding of which weekly options to trade, how much to pay for these trades, what strategies to use, and when to enter and exit each trade.

If this sounds like a lot of work to you, don’t worry! Our membership service does all of this for you, so join us today, and start winning with weeklys.



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