High volume weekly options can be defined as weekly options
that are experiencing a large amount of trading activity; in other words these
options contracts are being bought and sold in sizable numbers. The volume on
all options varies constantly, based on a number of factors, but there are
certain options which generally tend to fall into the category of “high volume
GET YOUR FREE WEEKLY OPTIONS USA TRADING NEWSLETTER
CONSISTENTLY HIGH VOLUME WEEKLY OPTIONS
Any weekly options available for companies listed on the Dow
can usually be classed as high volume weekly options. These include technology
companies such as Microsoft, Intel, Apple and IBM, as well as companies in the
healthcare sector like United Health and Merck.
The volume of options trading correlates with the volume in
buying and selling the underlying stocks. As well as the obvious interest that
the stock trading volume indicates, many stock traders also use weekly or
monthly options as a means of hedging their positions against losses.
IMPORTANCE OF HIGH VOLUME WEEKLY OPTIONS IN TRADING
Sufficient volume is vital in trading any options, and
especially weekly options with their short duration to expiration. If there is
not enough trading volume, then a trader will likely be unable to sell their
option contract for the price they want within their time-frame, regardless of
the value of the contract. For this reason, it is important to consider the
typical volume of an option when choosing weekly options to trade.
While high volume is important in trading weekly options, it
is also detrimental overall when volume becomes too high as a result of
situations like the GameStop story of early 2021. A massive increase in volume
pushes prices too high, and leads to overvaluation which will generally result
in many traders losing a lot of money when the price eventually experiences a
CONNECTION BETWEEN VOLUME AND VOLATILITY
An increase in implied volatility (IV), which is the
expected amount of future price fluctuation, also typically creates an increase
in volume. In relationship to trading weekly options, an increased IV means
that there is a greater chance that the price will move significantly enough
during the life of the option to achieve a desirable profit.
It is equally apparent that an increase in volume also leads
to an increase in implied volatility as the amount of trading causes
fluctuations to the price of the stock.
FACTORS THAT AFFECT OPTIONS VOLUME
Even with options that are typically high volume weekly
options, there are many circumstances that influence the volume at a given
The length of time before expiration. As an
option contract nears its expiration date, it may experience either an increase
or decrease in volume, and this is also linked to other influencing factors.
Insider selling can greatly affect the volume of
Hedge funds buying in or selling.
A new product being launched.
Earnings report imminent or having been given.
Upgrades or downgrades given by recognized
analysts have a big impact on volume.
Comments from a key person such as Elon Musk in
relation to Tesla or BitCoin can send volume skyrocketing.
A FINAL WORD ON HIGH VOLUME WEEKLY OPTIONS
When you decide which weekly options to trade, make sure
that you choose options that meet at least one of two criteria; usually trade at
a high volume, or provide strong reasons that they will experience high volume
within the life of the option contract.