Weekly Option Trade Setup
November 28th, 2011 
Genius So you want to trade weekly options?
Never mind that they are most risky than monthly options. But the quick money and high returns are sometimes too hard to resist.
Ok then, here is a trade setup I use. When these conditions are met I trade credit spreads. More details are in the video. And in the members area, I added a video of me looking for, analyzing, and putting on a live trade with real money using this setup.
To clarify . . . when market moves down you’re looking for a “Bull” Put spread, not a “Bear” Put spread right?
Hmm, guess i messed that up.
Ok if the market moves down, i want to sell Puts.
If the market moves up, I want to sell Calls because the market will probably not continue the strong move higher if it is not already trending and there is no news. Even if the move does continue it will probably not be strong enough to get to the short strike. of course, anything can and does happen but we are playing probabilities here and trying to improve the odds in our favor. There is no such thing as a trade or trader that never loses.
I sell weekly call options every week on FAS and FAZ. These are diagonal call spreads. I usually buy a leap option for FAZ and FAS with a delta of at least .80 and sell way out of the money weekly call options against my leap options. These options have very high Implied volatility, so I get very good premium on the calls I sell every week. These week I brought in 1.84 in total premium selling 2 weekly call options.
Good stuff. Can you give any specific examples with numbers?
Thanks!!!!
Weekly Option Trade Setup I think the presenter means to sell a Bull Put Credit Spread not a Bear Put Credit Spread
I haven’t been able to find out what you charge for your service.Pls advise or direct me to the data. thx
http://www.optiongenius.com/becomemember.html
Boy, I hope no one got caught in this trade. The market is a fickle beast and this is one example of this kind of trade not working out so well, at least for the last 2 days. I was fortunate to sell puts on a few things for this week and now I’m doing great! I hope some did the same and are not getting “burned” right now. Good luck all!!
For those not sure what he is talking about, in the members only video I did a weekly SPX trade on Monday where I sold the weekly 1230 Calls and bout the 1235 Calls.
SPX is trading at 1235 at this second on Wed. the SPX is up 3.35% today on news that the world central banks will be supporting the europe central banks by printing more money so they can try to stabalize the european debt issue.
Note: it took the concentrated efforts of the world’s central banks to put this trade into a losing position. I think that validates that the setup is pretty good because you are not going to get something of that magnitude every time.
Anyway, there is still one full day of trading tomorrow and then the open on Fri to see how this trade comes out. it is down about $500 on margin of $800 or so. The worst that can happen is to lose the whole $800.
Yes Genius, we do hve 2 days, maybe we’ll get a little relief from the euphoria, it sure won’t hurt my put spreads. I did add a call spread to a couple of my positions to take advantage of a pullback and add more income to the trade(s). We have Jobless Claims, ISM and Construction Spending tommorrow and some things on Fri. mostly Fed guys speaking so hopefully no more big jolts. I figure if we drop any at all from today’s close to Fri end of close, I’m golden !! Good luck all!!
Hi Billy. Did u sell any weekly credit spreads on the SPX this week?
Hi Jerry,
Yes I sold the DEC standard expiration 1170/1160 put credit spread for $ 0.50. I usually trade with 20 contracts so I hope to make max of $940 after commissions. I like to get a far away as possible because even in the most extreme situations I can roll it or wait till sanity prevails.
Hi Billy. Did your SPX put credit spreads expire worthless today? I bought to close my FAS DEC 17 2011 $72.00 call for $15.62 and I let my FAZ DEC 17 2011 $50.00 call expire worthless. I made a total of $117.12. Thursday I sold to open the FAS DEC 23 2011 $64.00 call for $1.10. I may buy 100 shares of VXX Monday morning and sell a in the money weekly call. U brought in very good income this week Billy $940 WOW!!!! Do u trade for a living?
I sell weekly SPX put credit and call credit spreads each week depending on charts and my gut feeling. I try to get about 70 to 80 points out. It works great. I am intrigued by Jerry Jones technique and have a question. How does this affect your trade if either one goes down quite a bit? Just trying to figure out the risk as one or the other will go down.
I too am interested in Jerry’s diagonal call spreads on FAZ and FAS. Can you (Jerry) provide a sample trade?
Hi Billy and Tom. This week I had 3 winning trades with FAS and FAZ. My FAS diagonal spread was I bought the FAS JAN 21 2011 54.OO call for $13.01 and sold the FAS DEC 09 2011 70.00 call for $0.36. Today I bought back the FAS DEC 09 2011 70.00 call for $0.05 and sold to close the FAS JAN 21 54.00 call for $14.70. I made a total of $194.34 on those 2 winning trades. My FAZ spread is I am long the FAZ APR 21 2012 50.00 call and I sold the FAZ DEC 09 2011 52.00 call for $0.45 which I let expire today, and I get to keep the $0.45 for a total of 3 winning trades and a total of $239.34 for the week.
Today I bought the FAS JAN 21 2012 60.00 call for $11.00 and sold the FAS DEC 17 2011 72.00 call for $1.18. Even if FAS gets to $72.00 I will still make a profit since my FAS 60.00 call is so deep in the money and righ now has a delta of 0.66. If FAS gets to 72.00 my 60.00 call will have a delta of 0.76. Using the profit and loss calculator if FAS is at 72.00 I will make $505.20 on the trade. On my previous response I meant FAS JAN 21 2012 54.00 call. Sorry about that Billy and Tom.
excellent information. thanks for sharing your trade. I will give it a try.
Today I sold to open the FAZ DEC 17 2011 $50.00 call for $0.26. My FAS DEC 17 2011 $72.00 call is up 77.75% today. I can make $132.73 after commissions on these 2 weekly call options, if they expire out of the money friday. Thank u Tom.
Hi Jerry, Yes they expired. This week I have a bull credit spread on SPX at 1155 – 1145. It’s around 1240 today so they should expire tomorrow. I should take them off at .05 but with 20 contracts it will cost me $100 + $60 in commissions. 2 more days to go. I don’t trade professionally as I have a day job. These trades are quite boring but I am trading it in my IRA so I want boring.
To be clearer – they WILL expire tomorrow. Hopefully worthless…
Hi Billy. How is your trading going? Are u still trading credit spreads on the SPX weekly options? I put on a trade on the SPX weekly calls for this week. I sold the 1350 call and bought the 1355 call for a credit of $0.30. Do u have any credit spreads for this week?
Hi Jerry,
Yes still trading the credit spreads. In fact I have almost the same as you do this week. I have a 1350/1360 call spread and I got .50, but of course more margin and risk. You can easily do the spreads at 5 points instead of 10. I always try to get as far away as possible and get at least .50. Which mean you can get further away with a 10 strike spread, but the risk is higher. One thing I worry about this week is the payroll report on Friday. I think it’s the most over rated report but it’s very volatile. I was 33 points away from my spread when the payroll report came out as 0 a few months back and the SPX dropped 40 points. So I usually like to get out before Friday if I’ve got a profit. What I do is put on a good till cancel trade to buy back the spread at .10, but it doesn’t always work out. Just be aware of the payroll report on Friday.
What’s up Billy? Did u buy back your 1350/1360 call spread or let them expire? I let mine expire worthless, but I was a little afraid Friday because the market rallied and the SPX got up to 1245. How many credit spreads do u put on every week? This week I got 2 put spreads on the 1275/1280 and the 1310/1315. I brought in $0.30 for each spread. How many credit spreads do u have this week Billy? Who is your broker? I use tradeking, their commissions are only $7.01 for SPX spreads, $5.63 to sell calls, and $4.95 to trade stocks. Goodluck!
Hi Jerry. I bought mine back on Thursday for .05. It did get a little close. I usually trade one spread a week, as I’m trying to be very conservative. I’m trading 20 contracts. This week I have a call bear spread at 1370/1380 for $0.65. I have an order to buy it back at $.10, but if it doesn’t hit by noon Thursday and I’m 20 to 25 away, I’ll probably let it expire unless it get’s too close. Then I’ll close it out. I trade with thinkorswim and my commissions are 1.50 per option, so I end up paying $60 to put on a trade or take it off. If you pay $7.01 is that per option contract? That means I would have to pay $140. Is that for buy and sell or each way? I think both your spreads are gonna expire worthless this week. Good trading!
Where may I get educational information on weekly option trading?