Trading the Weeklys – Video

by Jeff on July 4, 2010

I mentioned in my previous post that there are now weekly expirations on many new underlyings. (they are: SPY, QQQQ, IWM, GLD, XLF, EEM, C, BAC, AAPL, BP, F and GOOG).

Just in case you were wondering how to do it, or what strategy to use, or how you might back test; I made a new video called Using TOS OnDemand to Trade Weekly Expirations. You will find it on the far right column under the New Downloads section.

If you are a TOS customer and you haven’t been using OnDemand, this is your opportunity to get a look at how it works.

◄ Jeff ►

Tagged as: Back Testing, bull put spread, OnDemand, Vertical Spread

  • http://theoptionguru.com/blog Jeff W

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  • Anonymous

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  • http://theoptionguru.com/blog Jeff W

    Mike,nnNo, I never use them on my spreads for 2 primary reasons:nn1) I have the pleasure of monitoring the market during the day, although I am not a day trader and I don’t sit here the whole day, I do have time to react to a negative move. Because of the short holding time, I do plan to exit early. Any move towards 445 will probably have me considering getting out (that is a potential Stop Loss area). 430 is a pretty significant support area from 2008, and GOOG expects to get approval for China – all Bullish signs. I won’t enter today unless there is another gap up, but not too big of a gap because I don’t want to go any higher than 440.nn2) Spread trades by definition have limited risk. Although I wouldn’t like it, I am prepared to take the max loss if something happens very quickly.nnOne other reason is price action. I have had many Vertical spreads move ITM on the short strike, and then have them move back to the OTM side. This month’s AAPL Bull Put is a good example. The short Put strike is at 250. Price spent 3 days below that and if I had exited, say when price hit 251 or so, I would have taken a beating. But, AAPL is still in an uptrend (the trend is your friend) and I had two weeks to expiration, so I sat it out. Right now the price is OTM (258.09) and profitable.nnConversely, I had a Bear Call on SPY (weekly) with a strike at 104, and price moved strongly above that. Based on market sentiment, I exited the spread for a loss. You win some and you lose some.nnu25c4 Jeff u25ba

  • http://theoptionguru.com/blog Jeff W

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  • http://theoptionguru.com/blog Jeff W

    Mike,

    No, I never use them on my spreads for 2 primary reasons:

    1) I have the pleasure of monitoring the market during the day, although I am not a day trader and I don't sit here the whole day, I do have time to react to a negative move. Because of the short holding time, I do plan to exit early. Any move towards 445 will probably have me considering getting out (that is a potential Stop Loss area). 430 is a pretty significant support area from 2008, and GOOG expects to get approval for China – all Bullish signs. I won't enter today unless there is another gap up, but not too big of a gap because I don't want to go any higher than 440.

    2) Spread trades by definition have limited risk. Although I wouldn't like it, I am prepared to take the max loss if something happens very quickly.

    One other reason is price action. I have had many Vertical spreads move ITM on the short strike, and then have them move back to the OTM side. This month's AAPL Bull Put is a good example. The short Put strike is at 250. Price spent 3 days below that and if I had exited, say when price hit 251 or so, I would have taken a beating. But, AAPL is still in an uptrend (the trend is your friend) and I had two weeks to expiration, so I sat it out. Right now the price is OTM (258.09) and profitable.

    Conversely, I had a Bear Call on SPY (weekly) with a strike at 104, and price moved strongly above that. Based on market sentiment, I exited the spread for a loss. You win some and you lose some.

    ◄ Jeff ►

  • mikejody

    Jeff, regarding the GOOG bull put spread you are entering tomorrow, do you use a stop loss for this trade?

  • http://theoptionguru.com/blog Jeff W

    Leo,

    It's a flaw that the gurus at TOS admit to. I guess if you want it more realistic, at least price wise, try changing to a higher price than mid when buying and a lower one when selling.

    ◄ Jeff ►

  • Leo

    I have been using Think OnDemand and love it , but it has a significant flaw. The fills are too generous and thus unrealistic.

    You get filled immediately at the midprice. Real life trading is far less accommodating.

    Is there a way to tweak this is it is more realistic?

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