Weekly Options Take Charge

Thursday, October 24th, 2013 | Vance Harwood

The volume of CBOE’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 20% of the CBOE’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)
    •  Until recently 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 October the CBOE started making SPX options available with weekly expirations 5 weeks in advance.   Evidently encouraged, they starting rolling 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’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)
    • Now there are four different tickers for SPX options,  a confusing mix of AM monthly/PM weekly, monthly, and quarterly options.  Unlike other options there are weekly options (PM settled) on the same week that the monthly (AM settled) expire.
    • Pending regulatory approval the CBOE plans to reduce this mess to two tickers in Q1 2013:  SPX  (the traditional, open outcry 3rd Friday of the month options) and SPXPM for everything else.

In general the move to weekly options has been gradual and non-invasive.  However the VIX Index is based on SPX monthly options and a loss of volume / liquidity in that particular option class would be  not be good.   I hope the CBOE will eventually modify the VIX calculation to take advantage of the finer granularity of the SPXPM weekly options—avoiding some of the nasty glitches the current index experiences when it switches to different contract months.

Get weekly updates on the Weeklys

Monday, January 21st, 2013 | Vance Harwood

The CBOE has announced a nice new email service for people wanted to know what weekly options are going to be offered each week.  While the list has been relatively stable the CBOE recently extended the list to 35 offerings and they usually make a few tweaks each week.   For example, they recently dropped USO in favor of NDX—something I’m not happy about.

They plan to send out an email, typically on Wednesday, listing the options they plan to list starting on Thursday.   To sign up use this link and look for the Weeklys option selection near the bottom of their list of available newsletters.   If you already have a CBOE login you can add this email update here.

Click here for more information on weekly options.

And then there were 35

Saturday, October 30th, 2010 | Vance Harwood

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’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…

Monday, July 19th, 2010 | Vance Harwood

Created a covered call position today with SPY at 106.89 and 107 SPY calls expiring this Friday–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–SPY, QQQQ, IWM, DIA and others

Thursday, February 7th, 2013 | Vance Harwood

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’s life.

Taken from http://www.option911.com/blog/option-education/how-option-time-premium-decays-over-the-weekend/, click to enlarge

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–and others flock to them.    As a covered call writer I am really attracted to the accelerated time decay of short term options.   I’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.