Commodity Trader's Almanac 2013: For Active Traders of Futures, Forex, Stocks, Options, and ETFs

ADVANCED OPTIONS TRADING STRATEGIES AND TACTICS

Last year we introduced several ways to take advantage of seasonal trade ideas as presented throughout these pages. We started with basic options strategies: what goes into theoretical options pricing, including the Greeks and Volatility. We also went into spread trading methods. This year we want to follow up with these two trading methodologies and expand on the ever-evolving options product choices.

WEEKLY OPTIONS

First, for traders wanting to take advantage of the S&P 500 stock index (and individual stocks) seasonal moves there are weekly options provided by the Chicago Board Options Exchange (CBOE). Simply stated, weekly options are listed to provide trading opportunities on a week-to-week basis. This eliminates buying excessive time value (Theta).

Typically, weekly options are listed on Thursday and expire the following Friday. This gives traders an opportunity to take a directional trade into a weekend with the advantage of potentially profiting from increased leverage and reduced costs associated with purchasing option premium without undue time value decay risks.

More importantly, weekly options allow traders to take advantage of a directional move that they might normally hesitate on due to a news-driven market event, such as a major economic report, a Federal Reserve announcement, or a pending foreign central bank meeting, and even a major earnings report.

On the last trading day or expiration in the S&P 500 (SPX) weekly ...