Sunday, October 2, 2011 EST

What are Weekly Options? Simply stated these are options that expire each week.  Why do we care about this? It could be useful for a short term trade selling naked puts with the goal of those puts expiring worthless.

The CBOE has this to say about weekly options: "No one wants to wait. With Weeklys from CBOE, you don't have to. Weeklys are options that expire at the ends of weeks. This flexibility can provide investors with more targeted trading opportunities and can help investors take advantage of market events, such as earnings, government reports and Fed announcements. CBOE's Weeklys options are currently listed on Thursdays and expire the following Friday. New Weeklys are listed each week except that no new Weeklys are listed that would expire during the expiration week for regular options (the third Friday of each month). "

Search Features

In order to search on weekly options go to the Expert Option Search page and select Weekly Options in the Sector drop down list.  You can either select all dates or a specific date as shown below.

Example

Lets go through a theoretical example for American Express (AXP) that expires on 10/7/2011. This example covers selling a cash secured/naked put with the goal of the put expiring worthless and the seller keeping the money.  Why is this a "theoretical" example? Because we do not recommend any specific trades, just the tools for investors to find trades.

If you notice AXP has a handful of naked puts that expire on 10/7/2011. 

Lets apply a couple of filters to our selection process, filters that attempt to help us to sell an option that will expire worthless.

1. Pick a strike with a low Probability of Assignment (POA). Remember the word "probability." Trades are all about probability and is most likely to happen. There is No Guarantee, anything can happen.
2. Pick a strike that is Out of The money. The further out the better. 
3. Select the $41 strike for this example. It has a POA of 14%, ROI of .66% (not bad for a week) and is almost 9% out of the money.
4. Next lets look at a stock chart and support and resistance levels.

There is a major support level in AXP around the 44.90 level and AXP just dipped below it. The next support level is at 42.50.

Now we have to ask the question "Based on the recent market action, POA, OTM, and resistance levels is selling a naked put on AXP worth the risk for a 4-5 day trade?"  If we answer yes sell the put, if not keep looking for the next trade.

We hope you find this search feature profitable. Best success in all your trading.

Disclaimer

 

Thursday, September 29, 2011 EST
We recently pulled the MTR-TM off of the site to review it after the recent whipsaws. 

The last Market Up signal held even after the market retraced around 8%.  This caused us to take the model off line and review the logic to make sure it was not a bug or data issue.  We found that the rules were intact.  Timing models as a rule (there are free and costly models on the Internet) will have whipsaws in a sideways market.  With the wide range of the recent sideways market it is a confirmation of the difficultly of timing in a sideways chop.  This current sideways market was a great setup for trading support and resistance, but only if you drink decaf coffee. :-) 

We had planned on keeping the MTR-TM offline.  We had many email requests regarding the model and getting back on the site.  In order for us to revise the logic it will a good bit of time.  The model was back tested and forward tested for well over a year, and then it appeared only as a blog for a good while after that.  In order to make any meaningful change to the model it will have to be back tested again to make sure historical trades are good or better.  Then it has to run live for a good bid of time to see how it works real-time on out of sample data.   This can only be accomplished over many months of testing.

Some additional background information:  The MTR-TM is fully automated there are no human fingers of massaging of the data or making a second guess on any of the signals.  Each night a schedule job collects the data and performs all the calculations and sends out email alerts. 

 

The MTR-TM can be found under the Market Analysis menu.

Disclaimer

 
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