For the past few days, Markets have shown amazing resilience to make a comeback from triple digit losses (I am referring to Dow) netting out no significant change. But one thing is for sure, intraday moves are becoming larger. So pls start to pay close attention to market internals. I don’t know which direction markets are headed, but what I sense is a nervousness on the part of market participants. Neither bull nor the bears want to take any strong position. As I mentioned earlier, Ms Vega is here to stay for while and it’s better that I start to pay more attention to her.
I haven’t seen wider media mentioning an important change that has occurred and is continuously changing option trading landscape, and it is introduction on weekly options. Sometimes, opportunities are better without much fanfare. Earlier what used to be a monthly opportunity, is now being offered 4x. Welcome to the amazing world of weekly options.
The introduction of weekly has offered options traders far more opportunities. Albeit, it is a double edged sword. If not managed properly, it is also a recipe to lose money faster. I have been analyzing weekly and posted some nice real time free ideas where we booked gains like +25% on AAPL, +13.6% on FSLR, +19% on BIDU and many more. However, due to recent increase of volatility and intraday move, a stable income generating strategy is not in place yet. I shall update here once we have something in place, I am continuing to experiment with real money. Click here to stay connected for real time alerts.
So you don’t miss the power of weekly, let me give you an example– next week’s GOOG 490 Call, as of this writing when GOOG is at 482, is $4, so google needs to move $12 before these calls will be in the money. If you are a premium seller and look at Theta alone, that can bring about 10% of the cost of options/day, of course assuming GOOG remains below 490 by next Friday. While on the surface, it doesn’t seem like a big deal, but when you start to think of rolling weekly over to next which is hedged by leaps, the results can simply be amazing with potential to deliver over 15-20% /month. For the latest list of weeklies, pls click here.
Watchout– The theta and gamma are something to watchout for. Pls ensure you understand greeks well before you plunged into the weeklies.