Risky but rewarding, Weekly Options trading has become more and more popular since it debut in 2005. With hundreds of stocks offering weekly equity options, traders might be overwhelmed with what to choose for minimal risk and maximal profits. With this blog, we hope that we can save you some headaches by sharing with you the 9 best stocks for weekly options trading.
What stocks trade weekly options?
If you are tempted with an aggressive way of taking the trade, it is time to check this term out. Weekly options, first introduced by CBOE in October 2005, are basically short-term options as it has a life of only one week before expiration while traditional options might last for months or even years. A new list for most active weekly options is published each Thursday and expires the following Friday. However, there are many stocks now that have weekly options going as far as 5 weeks.
Pros and Cons of Weekly Options Trading
Before jumping on the bandwagon with the best stocks for weekly options trading, the first thing you should check is the advantages and disadvantages of Weekly Options Trading to decide whether it’s an appropriate investment strategy. And here are its pros and cons for your reference:
- You will get paid 52 times per year, not 12.
- It is similar to traditional options so you can make the most of your existing knowledge and techniques.
- Unlike monthlies, you can make a very short-term bet on a particular news item or anticipated sudden price movement.
- It is almost impossible to repair a trade that has moved against you by either adjusting the strikes or just waiting for some kind of mean revision in the underlying security due to the short duration and rapid time decay.
- Despite good open interest and volume, some strikes might have very wide spreads, and that is not good for short-term strategies.
Top 9 Best Stocks for Weekly Options Trading
Weekly Options trading is undoubtedly risky, but what trading strategy is not? Although no trader wins all the time, with the right knowledge and tools, you can always maximize your profits with minimal risk. There are hundreds of stocks for you to trade weekly options with three main types: Weekly Index Options, Weekly Exchange-Traded Fund (ETF) Options, and Weekly Equity Options.
We will list here the 9 best stocks for weekly options trading to consider for your next trading session. Take a look and do some research if needed, these are among your best bets to trade weekly options in stocks successfully.
1. Dow Jones Industrial Average (DJX)
The Dow Jones Industrial Average is a price-weighted index composed of 30 of the largest, most liquid NYSE and NASDAQ listed stocks with the option contract based on 1/100th (one-one-hundredth) of the current value of the Dow Jones Industrial Average. DJX options have grown to become some of the most popular index options worldwide since their introduction in 1997.
2. CBOE Volatility Index (VIX)
VIX is the ticker symbol as well as the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a well-known measure of the stock market's expectation of volatility based on S&P 500 index options.
3. S&P 500 Index (SPX)
The Standard and Poor's 500, a.k.a the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on exchanges in the United States. S&P 500 Index is among the most commonly followed equity indices. (Source: Wikipedia)
4. CBOE Mini S&P Index Options (XSP)
The CBOE Mini-SPX option contract (XSP) is an index option product designed to track the underlying S&P 500 Index. At 1/10 the size of the standard SPX options contract, XSP offers greater flexibility for new index options traders or traders managing an individual portfolio.
5. MSCI EAFE Index (MXEA)
The MSCI EAFE Index is a stock market index designed to measure the equity market performance of developed markets outside of North America (the USA & Canada). It is maintained by MSCI Inc., a provider of investment decision support tools. EAFE stands for Europe, Australasia, and Far East.
6. MSCI Emerging Markets Index (MXEF)
Constructed based on the MSCI Global Investable Market Indexes (GIMI) Methodology, the MSCI EM Index is designed to dynamically reflect the evolution of the emerging markets opportunity set and to help investors meet both global and regional asset allocation needs.
7. S&P 100 Index (American style) (OEX)
Maintained by Standard & Poor's, the S&P 100 Index is a stock market index of United States stocks. Index options on the S&P 100 are traded with the ticker symbol “OEX”. Because of these options’ popularity, investors often refer to the index by its ticker symbol.
8. S&P 100 Index (European style) (XEO)
The Standard & Poor's 100 Index is a capitalization-weighted index of 100 stocks from a wide range of industries. The component stocks are weighted based on the total market value of their outstanding shares.
9. Russell 2000 Index (RUT)
Like the majority of popular stock indexes (the Dow Jones Industrial Average (DJINDICES:^DJI) being the main exception), the Russell 2000 is a market capitalization-weighted index. The Russell 2000 is designed to offer the best indicator of how small-cap U.S. stocks are doing.
As stated above, trading weekly options are not for the faint-hearted. This trading strategy is filled with risks and only those who have extensive knowledge of the markets and suitable tools and techniques can stay ahead of the game. If the strategy’s benefits outweigh the risks and you are tempted to give it a try, check out these courses The HV7 Option Trading System – Aeromir and The A14 Weekly Options Strategy – Aeromir to better your weekly options trading skills first. We hope that once you are ready to take off, this list of the best stocks for weekly options trading will get you fly high.