Weekly options allow traders to capitalize on short-term news
As new traders flood the market, a return to the basics may help novices understand the fundamentals of options trading.
Stock options are contracts that represent the right to buy (or sell) shares of the underlying equity at a predetermined price, and by a predetermined date. These options are a flexible way to trade, with long or short predictions in the way of calls (bullish) or puts (bearish). As indicated by their names, weekly stock options expire on the Friday's of their respective week, while monthly stock options expire on the third Friday of each month. Weekly options are listed the Thursday eight days prior, and it's worth noting that weekly stock options aren't offered on the monthly options expiration date.
Weekly options trading allows traders to make more short-term bets on a stock, relative to the standard monthly trading. This lets traders take more recent news into account, and speculate on close upcoming events, for example, increased upside or downside for a stock after it reports quarterly earnings. However, due to their short life-span, it's difficult to revise your trade before the contract expires if the stock makes an unfavorable move.
Lastly, when it comes to trading these options, here are the top 10 mistakes to avoid. These trading errors will help give more clarity to what can happen in a hectic market.