3 Great Ways to Use Weekly Options

05/24/2012 1:50 pm EST

Focus: OPTIONS

Marty Kearney

Senior Staff Instructor, The Options Institute, CBOE

Traders have quickly caught on to the versatility of weekly options, explains Marty Kearney, who discusses widespread use in calendar and credit spreads, and as effective news-trading vehicles.

One product that has really taken off recently is weekly options. Our guest today is Marty Kearney from the Chicago Board Options Exchange (CBOE) to talk about how those are doing and give us an update. So Marty, how have those weekly options been received?

Tim, I’m as surprised as anybody on this. We’ve seen where sometimes 10% to 20% of the overall volume in options is in the weekly products, so it’s been very well received by individual investors.

And how are they using these weekly options?

Sometimes they might turn into calendar spreads of some sort where they own something further out in time and they’re selling something shorter term.

We’re also seeing people playing earnings reports, product announcements, FDA approvals, and things of that nature. So we’re seeing people taking long and short positions on these products.

Sometimes little credit spreads where they’re bringing in some income, but anything you can do with regular options, you can do with the weeklies.

Traders can check CBOE.com to find what products are going to have the weekly options going forward, right?

Yes, and this is something that we get a lot of questions on. Sometimes you’re taking a look at a stock and all of a sudden, there are no weekly options available. What happens is on Wednesday night at CBOE.com, maybe 5:30 Eastern time or so, we publish the list of stocks that will be listed for weeklies for the following week.

They start trading on Thursday and then they expire a week from the following day, so they trade for eight days, or seven trading days.

What happens is not that the stocks get delisted, but we don’t add the weeklies on a company that has nothing really going on, but if company XYZ has earnings next Tuesday, rather than wait and trade the monthly options, we will add that stock for that particular week. At the end of that week, we might drop it on that Wednesday night and put in something else that’s in the news and investors are asking for.

So do you see them adding to those numbers that have weekly options available?

Yes, at the point we’re filming this, there are 183 stocks, ETFs, and indexes that have weekly options. I think there will be some added.

At this point in time, it’s on a pilot program, which means that it’s not necessarily permanent and it’s not available on everything.

We don’t need weekly options on everything, but the stocks that are in the news, I think we will continue to add those as demand is there.

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