Process of Trading Weekly Options for a Living

  • August 29, 2018

Watch our video trading weekly options for a living.

Trading weekly options for a living can be a great source of income. Options give you the right but not the obligation to buy or sell a stock at a specified price. Learn the benefits of trading weekly options in the video above. 

Options allow a little more freedom with buying a company like Amazon. When you purchase one option you control 100 shares of the stock. One options contract is cheaper than purchasing 100 shares at market value. This makes them very attractive to traders.

Trading Weekly Options for a Living (Breakdown of How to Trade Them)

  1. Choose weekly options contracts with 1-2 weeks until expiration
  2. Trade highly liquid large cap stocks
  3. Tight bid/ask spread
  4. Strike prices either ATM or ITM
  5. High open interest with volume

When you're trading weekly options for a living you're buying an option with an expiration date within the week you're trading or a week out. These kinds of options are less expensive.

Options have expiration dates. Because the expiration date is sooner than a traditional option, it's going to be cheaper. This is because these trades can be riskier.

You need the trade to go your way without giving yourself a lot of time. These options are cheaper because there isn't as much time value. You, the buyer, don't have to pay as much because you don't have as much time to be in the money.

trading weekly options for a living

Options is a sector not a lot of people take advantage of. It's a pity because they're profitable and a lot of fun to trade.

1. The Short Term Trader

Trading weekly options for a living allows you to be a short term trader. Typically trading weekly options means you're making 4 trades a month (this can also be considered swing trading options).

That might not sound like a lot but remember, you control 100 shares for every option you purchase. This definitely adds up. Depending on the companies you trade, the volatility can really help.

Employing short term options trading strategies is a big plus. You can play the volatility surrounding earnings, economics reports, and any other short term news that causes stocks to be volatile.

A traditional options contract might last several months. With weekly options you can target a specific date and time period.

2. Factors

Options are a different animal than stocks. There's more involved with trading options like implied volatility, the Greeks and time value to name a few components. These Greeks affect the value of your options contracts, depending on how long you hold them, and what the price of the stock is doing, and if there is an "event" that needs to be priced in. 

This is something that can dissuade a trader from trading weekly options for a living. Or even trading options at all. Options don't have to be scary though. You just need to learn about them. Conquer your fear of the unknown with our free courses.

Yes they have more to them than a stock but you can use those to your advantage. Take advantage of our options course. Study the different options components and turn it into a money making machine.

trading weekly options for a living

Take the time to study options. It's worth it!

3. You Can Make Money in Any Market

One of the beautiful things about trading weekly options is being able to make money in any market. This is where options can blow stocks out of the water. You can make money when the market is up, down or trading sideways. There are different strategies for each circumstance. 

If the market is trending down and you don't have an awesome broker like Interactive Brokers that has good shorting availability, you might have to sit out and wait for a bullish trend to return. That's where options are great because you can profit in both bull and bear markets. You can use Robinhood or Tastytrade to trade options for example.

If the market is bullish you can buy calls. If it's bearish and you can't short, you can sell calls. Selling a call is basically shorting or saying you believe the price of a stock is going to go down. You buy the call back for profit when you think the stock has finally stopped dropping.

Being able to make money in any kind of market allows you to trade weekly options for a living. You're not stuck having to trade in one market (check out our stock market basics page).

What Is the Difference Between Monthly and Weekly Options?

  • Monthly options expire on the 3rd Friday of the month. Weekly options aka "weeklys" are options contracts that expire every week on Fridays. Weekly options are not found on every stock. Weekly's are found mostly on larger cap stocks.

1. Technicals: Trading Weekly Options for a Living

When you're trading weekly options for a living, you're banking on a stock going a certain direction that week. You only have that 1 week window to get it right. Whereas a traditional monthly option gives you at least a couple months to recover profit if you make a bad trade.

Using technical indicators are going to help you determine a trend, a buy or sell signal as well as support and resistance. If you're buying a weekly call option, you don't want to buy at a resistance level.

Using good technical analysis is going to help you minimize the risk of making a bad trade. Not every trade will be a winning one though. It's important to cut your losses quickly. Especially when you're trading options for a living. Check out our trading service to learn more.

Usually when I day trade weekly options on a Monday or Tuesday, I'll trade Fridays expiration. I recommend you look at going out at least two weeks and find options that have tight bid ask spreads, high volume and high open interest too.

Trading Weekly Options

Check out the call chart of $FCX - notice the strong channel? It'san hourly chart so you can see the price action trend and price structure quite well. Identifying these types of options charts is key when trading weekly options. 

What Does Weekly Mean in Options?

  • Weekly options are similar to monthly options but expire every Friday, whereas monthly contracts expire on the 3rd Friday of every month.

1. Make Practice Trades

You want to practice making weekly options trades before using real money. This way you can practice, make mistakes, learn and ultimately see how things work. You'll develop a strategy that works for you.

You'll get used to the different moving parts of stock options. Things like time decay, implied volatility and intrinsic value. Let these work for you and take the time to learn the different components of options. You'll thank us later for stressing this part of the process.

2. Trading Weekly Options for a Living Is Fun

Trading options for a living allows you to trade large companies and systematically capture profits from the market over and over. One options contracts control 100 shares and are cheaper than buying those shares. If you own 5 options contracts you control 500 shares, 10 options contracts controls 1,000 shares and so on and so forth. You may not care too much about the details of controlling shares and have no intention of holding the contracts  along time, and that's fine! Just know the ins and outs of trading them and you're good to go.

That adds up pretty quickly. In the end you'll find that trading weekly options for a living ends up being pretty lucrative if you practice good risk management and build a system with high probability trades. Check out our stock alerts for education on this!. Also don't forget to take our options trading course and sign up for our stock alerts if you are a member already (or not a member yet!)

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