Using Weekly Options
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read the previously provided copy of Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparison, statistics, or other technical data will be supplied upon request.
Spreads, iron condors, and other multiple-leg option strategies can entail substantial transaction costs, including multiple contract fees, which may impact any potential return. These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades.
The examples contained in this webcast do not take transaction costs into account (commissions and other fees such as contract fees, exercise and assignment fees, etc.) -- they are important factors and should be considered when evaluating any trade.
The following presentation is not a recommendation or endorsement of any particular investment or investment strategy. Returns will vary and all investments involve risk, including loss of principal. Asset allocation and diversification do not eliminate the risk of investment losses. Diversification does not assure a profit or protect against loss.
TD Ameritrade does not provide tax or planning advice. We suggest you consult with a qualified tax-planning or retirement-planning professional with regard to your personal circumstances.
Past performance is no guarantee of future results or success.
The webcast is provided for general information purposes only and should not be considered an individualized recommendation or advice.
Investools Inc. and TD Ameritrade, Inc. are separate but affiliated companies that are not responsible for each other's services or policies. Investools® does not provide financial advice and is not in the business of transacting trades.
This presentation includes a feature that allows recording of electronic (including audio) participant-shared content. By continued participation in this session you automatically consent to such recording, and the subsequent rebroadcast of any recording.
Speaker
Mike Follett
Investools
®
, Instructor
17 years in the financial industry
Former options principal and trade desk manager
at Morgan Stanley Online
Instructor at Investools
®since 2003
Co-created and teaches the Advanced Options
Strategies workshop
Today’s Goals
1
2
3
Explain iron condors and calendars.
Define weekly options.
Demonstrate two methods for using
weekly options for earnings trades.
Weekly Options
Not available for all stocks
Cease trading Friday every week
Most eligible stocks have five weeks available (including regular expiration)
Why Use Weekly Options
Rapid time decay (income)
Short-term volatility events
Short-term portfolio protection
Iron Condors
Below is an example of how short verticals are combined to create an
iron condor, which is a
market-neutral
approach to selling volatility.
Weekly Iron Condor
Bear Call Spread Bear Call Spread Bull Put Spread Bull Put Spread
Below is an example of how a pair of long and short options (calls or
puts) are combined to create a calendar spread. The focus is to sell a
highly inflated near-term option covered by a further-dated option with
much lower volatility.
Weekly Calendar Spread
51%
35%
Implied Volatility
–
Inflates in anticipation of the event
Options prices inflate
Near-term options tend to inflate the most
–
Collapse after the event
Large downward adjustments after the news
Like popping a balloon
Stock prices
–
Who knows?
–
Iron condors and calendars can cover a range of prices.
Significant Positive Volatility Skew
–
Look for front week volatility to be at least 10% higher than
back week volatility.
Volatility Crush Happens Quickly
–
Potentially enter before market closes before
announcement.
–
Potentially exit by mid-day the next trading session.
Sell inflated volatility
Short-term speculative
–
Continue learning weekly options to:
Enhance portfolio through time decay
Manage with short-term risk adjustments
Goals Recap
1
2
3
Explain iron condors and calendars.
Define weekly options.
Demonstrate two methods for using
weekly options for earnings trades.
Investools
®
Website
www.investools.com
Investools Education
800-958-5056
Using Weekly Options
Up next:
Pairs Trading Futures
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read the previously provided copy of Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparison, statistics, or other technical data will be supplied upon request.
Spreads, iron condors, and other multiple-leg option strategies can entail substantial transaction costs, including multiple contract fees, which may impact any potential return. These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades.
The examples contained in this webcast do not take transaction costs into account (commissions and other fees such as contract fees, exercise and assignment fees, etc.) -- they are important factors and should be considered when evaluating any trade.
The following presentation is not a recommendation or endorsement of any particular investment or investment strategy. Returns will vary and all investments involve risk, including loss of principal. Asset allocation and diversification do not eliminate the risk of investment losses. Diversification does not assure a profit or protect against loss.
TD Ameritrade does not provide tax or planning advice. We suggest you consult with a qualified tax-planning or retirement-planning professional with regard to your personal circumstances.
Past performance is no guarantee of future results or success.
The webcast is provided for general information purposes only and should not be considered an individualized recommendation or advice.
Investools Inc. and TD Ameritrade, Inc. are separate but affiliated companies that are not responsible for each other's services or policies. Investools® does not provide financial advice and is not in the business of transacting trades.
This presentation includes a feature that allows recording of electronic (including audio) participant-shared content. By continued participation in this session you automatically consent to such recording, and the subsequent rebroadcast of any recording.
