How to Trade WEEKLY OPTIONs

How to trade weekly options, and how to achieve the best possible results in trading weekly options, is the focus of this article.

In explaining how to trade weekly options, it is important to point out that trading weekly options successfully requires a fairly high level of awareness and involvement from the trader.

Due to the increased time sensitivity compared with monthly options, and need for quick and decisive action, weekly options are best suited to a fairly savvy trader.  

We generally don’t suggest that a novice trader start with weekly options, and we offer a membership service using monthly options that is ideally suited to a less experienced trader who needs a little guidance while learning the ropes of successful trading.

FIVE STEPS FOR HOW TO TRADE WEEKLY OPTIONS

1.       How to Trade Weekly Options Step 1: Determine your trading capital and we suggest that you allocate no more than 5% on a single trade. If you are entering a trade that is cheaper than your allocated 5%, you may be able to buy several contracts to use the budgeted amount. If a trade is much more expensive, you could consider counting it as two trades, and using 10% of your trading capital, but this should probably be an exception, rather than a regular practice.

2.       How to Trade Weekly Options Step 2: Set up a trading account with an online broker. There are several brokers that do not charge fees for entering a trade, so this may be an attractive choice. If you are not in the USA, your choice of online brokers will be more limited, but there are a number of brokers offering accounts to international clients. For trading weekly options, it is worthwhile to consider having a day trading account, as this allows you a lot more flexibility in entering and exiting more trades. To have a day trading account, you must maintain a minimum balance of $25 000USD, so obviously this is not suitable for all traders.

3.       How to Trade Weekly Options Step 3: Establish your risk profile, and whether you will generally intend to exit a weekly options trade when our guideline 100% increase in price has been attained, or take a more or less conservative approach to exiting trades. Some traders are happy to take a 20% or 50% increase, while others prefer to ride the trade to maximum profit. There is no right or wrong, and no “one-size-fits-all” approach when it comes to how to trade weekly options. You need to find an approach that works for you, and be willing to use your own judgment.

4.       How to Trade Weekly Options Step 4: Research which stocks offer the best opportunities for trading weekly options. This is an ongoing process, as timing the market is a vital component in successfully trading weekly options. When entering a weekly options trade, there must be a strong expectation based on an imminent catalyst that there will be quick and significant price movement in order to attain a worthwhile profit within the short amount of time prior to expiration. If you do not have the time or desire to spend the amounts of time required for effective research, you can use a service such as our Weekly Options Advisory Service.

5.       How to Trade Weekly Options Step 5: Plan your trading strategy. A very important part of weekly option trading strategy is timing the entry and exit of your trades. You need to know how to handle trades that are experiencing a loss, and this includes whether or not you wish to use a protective stop loss and implement approaches such as doubling down.

in conclusion

When learning how to trade weekly options, there are a number of key areas to consider, and putting in the effort to understand these can really pay off. Weekly options, with their choice of frequent expiration dates, and generally cheaper costs, provide some great trading opportunities for the astute trader.