How to Get Started Trading Weekly Options For A Living: The Details You Need to Know FIRST
“I am trading weekly options for a living”
There are some people who would dismiss you as delusional if you told them this was your source of income. But the truth is that trading weekly options can be an excellent way to make money trading. It is not what most people think of when they hear trading, but it can be very profitable if done correctly. The key is knowing how to do it properly and learning what not to do.
Weekly options used to be fairly complicated and all over the news, because some traders were making huge profits off of them due to perceived market inefficiencies. However, since then trading currencies had become more standardized and trading options had also become more standardized (in terms of trading hours and settlement methods).
Here’s what we’re going to cover today
- Getting Started Right: What are weekly options?
- Let’s look at the main question involved here: Why trade weekly options?
- Can you make money trading weekly options?
- And could go wrong?
- So are weekly options more profitable?
- So how do you actually trade weekly options for a living? A Strategy for Weekly Options
- Can you make a living trading options?
- Let’s Recap: Pros and cons of Weekly Options
- What are some good resources for learning how to trade options?
Getting Started Right: What are weekly options?
Weekly options are derivatives that can be traded weekly. They are also known as “American-style” because they expire at the end of each trading week, unlike standard options which have a long term expiry. Weekly options are often formulated in indices, stocks or ETFs where there is high volatility in the short term. Typically these instruments are used by speculators looking for short-term profits within a time frame of one week to two months.
Let’s look at the main question involved here: Why trade weekly options?
Weekly options are usually cheaper than their monthly counterparts.
Sometimes it’s good to use weekly options when you believe that the price of an underlying security (say, Apple) is going to go up or down significantly in a short period of time (a week).
Can you make money trading weekly options?
The simple answer is, “Yes”. Weekly options have the same margins as monthly options but have a much higher ROI potential!
With that in mind, anyone with enough capital to trade one contract at a time could make money trading weekly options, because such instruments provide traders with much higher ROI potential than traditional monthly contracts do (in some cases up to 200% greater). As always when trading, successful traders need to know when and how long during the life of an option they’ll hold it, as well as actively managing their position size.
It is still possible to make a living trading weekly options though.
And what could go wrong?
Many traders have started trading weekly options, only to find that their trades ended up being small losses over time. This can occur through a number of means but mostly it’s because the trader mismanaged their position size or trading capital. Without proper risk management any trading strategy will fail in the long term, and trading weekly options is no exception – especially if you trade them incorrectly.
The key to trading weekly options is not to make this mistake! By using an appropriately sized 1 contract per trade strategy (not 1 contract per $1000), trading weekly options can be both profitable and very enjoyable too – even for beginners!
So are weekly options more profitable?
In some cases, Yes, they can be more profitable because you get to skip the saturation part of the cycle.
Holding a position for an entire week is considered a long-term buy and hold strategy, which has been shown in many studies to have a higher tendency to go up when compared with short-term trading strategies. In addition, it is much more likely that the buyer will have bought at or near a bottom when using this approach. Options with shorter terms (<5 days) also will see accelerated time decay towards expiration, limiting their profitability in comparison. Lastly, with weekly options there’s less chance for “fat” tail distributions due to price slippage from both buyers and sellers being lower – meaning that unrealized losses are not as high as they are with other trading options.
So how do you actually trade weekly options for a living? A Strategy for Weekly Options
As a popular strategy amongst traders, trading options for living involves buying at the money or in the money contracts on large cap companies. Traders buy these options with 1-2 weeks until expiration and they are typically traded short term movement or pops within stocks.
Can you make a living trading options?
The answer to a question like this will always be subjective. Ultimately it relies on personal decision of the individual.
Operating in the options market does present contingent, upside potential while also maintaining downside protection.
That said. most traders are better off following the trades of a more experienced trading company (like we provide with our memberships to The Empirical Collective) who specializes in online trading of options.
Let’s Recap: Pros and cons of Weekly Options
Pro: More competitive pricing from brokers from around the world, more sizes of contracts, and the ability to close a position before expiration.
Con: Weekly options expire Friday night versus standard monthly options that expire on third Friday. The risk is greater for short-term holdings. Trading volume is lower since there are fewer traders trading weekly options, which can lead to market volatility.
Pro: weekly options allow investors to take advantage of the pricing discrepancy between various stocks. weeklies give you a chance to buy up near the high for those who have been “going long” on a stock, and also allows you to sell up if things aren’t going as planned. This opportunity provides more flexibility for your investments, which may need because things change daily, hour by hour.
Con: Can be risky if company is declining in value or experiencing other hiccups like earnings announcements that are lowering the share price. So investors might want to avoid this type of investing unless they can handle risk well.
Pro: Weekly Options are a way for traders to trade during the week, when it is generally more difficult to find an open position.
Many people who would otherwise be unable to participate in the daily market now have an opportunity due to weekly options. It is also much cheaper, because you only buy one contract that expires at end of each week.
Con: If the price predicts one direction early on in the week but reverses before Friday’s expiration date then you will not be able to reap any benefit from your speculation and lost money on something that ultimately did not play out as predicted.
Is it possible to make money trading options without risk?
Predicting if an option will go up or down in value is called speculation and there is always a certain amount of risk involved when you’re trading.
Earning money without taking at least some form of risk is impossible.
That said, you can significantly reduce your risk profile if you’re just starting out by following along the option trade alerts that we provide inside The Empirical Collective.
With our trade win average around 94% and last years’ returns over 2,000%, our members have been very, very happy.
After all, how often can a regular everyday investor have better returns than the hedge funds?
What are some good resources for learning how to trade options?
Look, trading is a risky business. You have to be smart, work hard and get lucky to make a lot of money in the stock market.
The Empirical Collective provides you with trade alerts that are easy to implement and can increase your income over 2,000% per year (last year’s results saw an increase of 2,219.01%!). And our options trade alerts average a 94% success rate so you don’t need any experience or knowledge about trading for this product to work for you.
A membership inside The Empirical Collective gives you two different types of trade alert services: Options Trade Alerts and Stock Trades Alerts. Both products generate cash flow, with our Stock Trade Alerts helping you find 10-1000x gains on stocks with a slightly longer time frame (1-18 months).