Schaeffer's Investment Research's

Winning With
Weekly Options

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We want t o t hank you for t aking t he t ime t o review t his educat ional
report t hat our t eam put t oget her in our mission t o cont inue t o
assist individuals in capit alizing on t he st ock market ! Schaeffer?s is
t he #1 opt ions t rade alert publisher. We have been in business for
almost 40 years now, launching in 1981 when Bernie Schaeffer
published our flagship opt ions newslet t er, The Opt ion Advisor ®.
Our goal is t o provide expert opt ions t rading recommendat ions t o
individual invest ors, allowing our cust omers t o succeed in t he
opt ions t rading market wit hout having t o feel t he st ress and t ime
pressure of closely wat ching and t iming t he st ock market during
market hours. Our cust omers have t he opport unit y t o profit from
our proven success in t rading opt ions t hrough real-t ime
recommendat ion services and professional-grade informat ion.

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 Schaeffer's Best Practices for Trading
Weekly Options in 2020

To say that 2020 has been an in- better place to learn than from
teresting year for the stock market Bernie Schaeffer, the leading name
may be a bit of an understatement. in the options industry for nearly
The COVID- 19 crisis and subse- 40 years. We remain dedicated to
quent economic reactions have providing you with the best avail-
prompted some memorable (and able educational content that is
incredibly frequent) volatility easy-to-understand and incredibly
shocks. For the most part, though, valuable when the guidance is
these dramas have quickly re- implemented.
solved in the form of relief rallies. Schaeffer's has delivered a TON of
As a result, there has been no huge weekly options winners since
shortage of trading opportunities the COVID-19 crisis began...
on the bullish or bearish side.
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is no time like the present to mas-
ter the ins and outs of trading Keep reading to learn more about
weekly options. And there is no our approach...

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As the name implies, "weekly" op- value as expiration approaches) is
tions are those that expire on Fri- the enemy of the option buyer, the
days outside of the traditional ability to exercise tight control
monthly expiration week (normally over how much time value you're
the third Friday of each month). actually purchasing is a major
Weekly calls and puts are available benefit.
on a wide variety of popular Most stocks with listed weekly
stocks, which means that every options have contracts available to
week (aside from the week of trade up to six weeks out - - which
monthly expiration) is an options means you can trade an expected
expiration week when you are overnight move using the nearest
trading weeklies. expiration date, or you can look to
As a result, you have the opportu- take part in a developing uptrend
nity to fine-tune the time frame of (or downtrend) by buying just over
your trades to line up almost ex- a month's worth of time premium.
actly with your forecast for the Now, to make the most of your
stock's expected move - - which weekly options trades, let's dive
means you can be stingy about into Bernie Schaeffer's tips for
how much time value you're buy- winning with weekly options
ing. And since time decay (i.e., the plays...
non- linear decline in an option's

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 Bernie's Pro Tip #1:
Buyers should avoid sluggish stocks
(while sellers should seek them out).

By definition, a weekly option is a has reason to make a bigger-than-

short- term play, even if you're usual move, and the market is not
picking up five or six weeks of time accounting for this potential
premium. Since the underlying volatility in the option's pricing.
stock doesn't have much time to For example, perhaps the stock has
make a favorable move in your di- been locked in a consolidation pe-
rection, it's going to pay to buy riod during which its realized
weekly calls and puts on names volatility has cratered, but your
that have a history of big, dramatic technical analysis points to an im-
price swings. minent breakout.
If you are predicting a gradual up- And, of course, weekly options
trend in a stock - - the kind that aren't just for buyers. Slowly
may include the occasional pull- trending or range- bound stocks
back or period of consolidation - - might actually be ideal candidates
you'd likely be better served by for those looking to sell (to open)
purchasing an intermediate- term weekly calls and puts. By writing
option to allow time for the trade weekly calls and puts at price lev-
to develop. On the other hand, if els that align with existing levels of
you expect a drastic spike higher resistance or support, respec-
over the span of just a few days or tively, options traders can profit
weeks, that's exactly the type of from "business as usual" price ac-
scenario for which weekly options tion in that underlying equity.
were developed.
The exception to this rule would
be a situation where you believe
an otherwise slow- trending stock
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 Bernie's Pro Tip #2:
Whether you're buying or selling,
look for a catalyst.

Scheduled events -- such as prod- short-term chart coma.

uct launches and quarterly earn- From a sentiment perspective,
ings reports - - have been well- which is always important to con-
known to trigger explosive price sider here at Schaeffer's, it is very
action in the underlying shares, so encouraging to see a healthy sup-
most investors are already likely to ply of short interest, whether
have these on the radar. But there you're looking to make a trade on
are definitely other indicators that the bullish or on the bearish side.
can help you determine whether a For technically strong stocks,
stock is set to make a massive short- squeeze rallies can result in
chart move. So, whether you're major upside moves in a very brief
looking to buy or sell weekly op- period of time, resulting in that
tions, you'd do well to scan for coveted fast and aggressive move
these wild- card factors when the weekly options trader needs.
seeking a trading opportunity.
On the other side of the equation,
On the charts, keep an eye out for bears may grow even bolder and
historically volatile stocks that ramp up their short- selling efforts
have recently endured a period of as technically weak stocks rally
conspicuous consolidation, since into resistance levels - - setting up
this could indicate that a reversion a potentially ideal short- term put-
to the volatile mean is due in the buying opportunity. As always,
near future. Tightly pinched price action is key in determining
Bollinger Bands and the symmet- exactly how a high short- to- float
rical triangle (coil) pattern are two ratio could impact your weekly
technical indicators that can signal options trading profit targets.
an upcoming breakout from a
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 Bernie's Pro Tip #3:
Focus on liquid names with
narrow bid/ask spreads.

This is an easy rule to follow for price. The smaller the difference
weekly options traders, since between the bid and ask price at
these short- term contracts are the outset of the trade, the less
generally available only on names you'll have to worry about slippage
that have already attracted a fairly impacting your profits.
wide following among traders. As a word of caution, we have oc-
When a stock's options generate a casionally noticed that even when
respectably heavy amount of vol- a stock has a narrow bid/ask
ume each day, the bid/ask spreads spread on its standard options, the
tend to be narrow -- that is, there's weekly options might still have
not that great a difference be- widely spread pricing. If you see
tween the lowest price a seller is this, we encourage you to try to
willing to accept for a security and "work" the order by placing a limit
the highest price a buyer is willing order to enter the trade between
to buy. the bid and ask prices to improve
There are two major benefits to the odds of a quality fill. Or, if you
trading liquid options with narrow are trying to close out of an in-the-
bid/ask spreads. First, it helps to money option with a wide bid/ask
ensure your ease of entry and exit spread, attempt to get at least in-
on the position, since there's a trinsic value for the option, as
healthy built- in demand for the sometimes the bid price might ac-
contracts. Second, you've effec- tually be below its intrinsic value.
tively reduced the ill effects of
"slippage" -- which simply refers to
the fact that traders buy at the ask
price and sell at the (lower) bid
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 Bernie's Pro Tip #4:
Take advantage of affordable
hedging opportunities.

Weekly options can provide an Despite the looming event risk, the
economical way to hedge your weekly expiration put option will
stock positions against event- likely be cheaper than its front-
related risk using the "protective month counterpart (even if the
put" strategy. weekly is sporting a higher implied
If you're holding shares of a com- volatility level). And when you're
pany that's due to report quarterly buying put options to hedge - -
earnings early in the month, and which means you're generally
you're nervous about how the re- hoping the contracts expire
sults might be received, consider worthless - - it makes sense to
purchasing a weekly put option to minimize the amount of capital
limit losses (or lock in profits) on you're committing to the trade.
your shares.

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 Bernie's Pro Tip #5:
Learn how to play open interest
"speed bumps."

On expiration day for weekly op- weeklies to play a bullish or bear-

tions, it is not unusual for stocks to ish move, there won't be much
become "pinned" to heavily popu- time to recover from any ground
lated option strikes near their cur- lost to an open interest- related
rent price. This occurs due to the speed bump.
expiration- related unwinding of That said, option buyers can also
call and put open interest, as rallies take advantage of heavy open in-
above the strike are met with terest strikes by looking to play
options- based selling and declines breakouts above (or below) mas-
below the strike are met with sively popular strikes after the
options-based buying. The net re- open interest in question expires --
sult is a near- horizontal day of a tactic that's particularly well-
trading for the affected stock, as suited to that first week after
the opposing buying and selling monthly options expire. Once the
forces translate into a gridlock. obstacle of a major open interest
Premium sellers can take advan- strike is eliminated, it's the ideal
tage of this phenomenon by writ- time to bet on a directional move
ing puts and/or calls at near- the- beyond that barrier.
money strikes that already carry
heavy accumulations of open in-
terest. However, option buyers
should beware of heavy open in-
terest strikes that could get in the
way of their technical forecast for
the underlying stock. That's be-
cause if you're using short- term
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