Weekly Options Take Charge

Updated: Mar 10th, 2017 |

The volume of CBOE&8217;s Weeklyssm options has grown rapidly since they expanded their listings into equities and Exchange Traded Products in June 2010.  Now weekly options comprise almost 30% of the CBOE&8217;s average daily option volume.  The list of available weekly options is available on the CBOE website.



Among other things option traders take advantage of the Weeklys to position themselves for earnings releases,  harvest rapid premium decay near expiration, and place low cost directional plays.

Three recent press releases suggest that the Options Clearing Corporation (OCC) and the CBOE are moving to the next phase—making up to 5 weeks of options available on popular securities and moving existing options to look more like the Weeklys.  The specific moves are:

  1. Five weeks of Weekly options for many securities (press release)
    •  Initially Weekly options were only made available 9 days before their expiration.  If you needed a later expiration date your only choices were monthly options with their 3rd Saturday of the month expiration, or in some cases quarterlies.    In 2013 the CBOE started making SPX options available with weekly expirations 5 weeks in advance.   Evidently encouraged, they rolled out additional weekly expirations for additional  indexes and stocks (e.g., SPY & AAPL).    Overall I think the advantages of a more regular set of dates will outweigh the  problems with spreading option volume across more option classes.
  2. Friday afternoon expiration for most monthly options
    • The OCC announced a plan to change the expiration date for monthly options—to align with the Weeklys.  Instead of expiring on Saturday, they would expire at the end of trading Friday.   The Saturday expiration always seemed awkward to me, causing confusion on theta calculations and exposing investors to weekend news events.  I suspect it&8217;s a throwback to days when paper actually had to be shuffled to close things out.  This change, planned for February 2015, would render the 3rd Friday of the month options indestinguishable from Weeklys.
  3. Rationalizing ticker symbols with SPX options (press release)
    • There are  three different tickers for SPX options,  SPX, SPXW, and SPXPM. Unlike other options there are weekly options (PM settled) on the same week that the monthly (AM settled) expire.

In general the move to weekly options has been gradual and non-invasive.   One of the side benefits of the rise of the SPX weeklys is that now there are always options series that closely bracket the 30 day volatility window of the VIX calculation.  Using the monthly SPX options there were sometimes longish extrapolations required with suspect accuracy. In October 2014 the CBOE switched the VIX calculation methodology to take advantage of the SPX weeklys availability.   Ultimately this new VIX calculation was needed to support VIX Weekly futures and VIX Weekly options.

And then there were 35

Updated: Oct 30th, 2010 |

This week CBOE expanded their selection of  weekly options from 31 to 35.   The symbols added this week (expiring November 5th) are:  IBM PCLN RIMM SLV.   All these except PCLN (Priceline.com Inc.) have previously been on the list at some point.   For more on the CBOE&8217;s weekly options see here,  or see my guest post in the August issue of the online magazine:  Expiring Monthly: The Option Traders Journal —a publication I strongly recommend.

Playing the weeklies&8230;

Updated: Jul 19th, 2010 |

Created a covered call position today with SPY at 106.89 and 107 SPY calls expiring this Friday&8211;the 23rd.   The calls sold (to open) at 1.18, giving a 1.2% best case profit for the week if SPY closes Friday above 107.   Fidelity supports trading these weekly options, but apparently Schwab does not.

Weekly options for the masses&8211;SPY, QQQQ, IWM, DIA and others

Updated: Mar 10th, 2017 |

Anyone that trades options knows that the pace quickens the last few days before expiration.   The delta (the change in option price relative to the underlying)  for the ATM option is still around .5, but instead of gradual changes for the deltas on the strikes in / out of the money, the curve starts resembling a step function, going from zero for out-of-the-money, to one for in-the-money at expiration.   The time decay of the option premium (theta) also accelerates, with perhaps 50% of the decay in the last month happening in the last week of the option&8217;s life.


taken from http://option911.com/blog/option-education/how-option-time-premium-decays-over-the-weekend/

All of this is of course modulated by any changes in the volatility of the underlying, and the market in general.

Some traders avoid options close to expiration because of these factors&8211;and others flock to them.    As a covered call writer, I am really attracted to the accelerated time decay of short term options.   I&8217;m not taking any more risk than normal holding the underlying, and I am getting an accelerated decay in the price of the options I am short on.    I will often wait until there is only two or three weeks are remaining on the options to create the position.

Now it can be expiration week, every week for the following Stocks / ETFs (taken from this CBOE posting):

Most if not all brokers support trading on weekly options, you may have to select options on the options chains to see them.  Beware of the listed greeks on these options, the software may not be using the correct time until expiration.