All About Options

[expiated]

GAMMA

Instead of Gamma starting at around 0.5, like Delta, it looks like it starts at around 0.05 instead. It then decreases going both up and down the column, by roughly 0.005 to 0.015 each step.

VEGA

Vega starts off (at the strike price) at around 0.1300. (I need to take a look at how much this varies from one stock to another.) It then gets smaller (by increasing intervals) going both up and down the column.

RHO

Rho starts off (at the strike price) at around 0.025. In the call column it initially gets bigger as you head upward, but then starts to get small. Going down the call column, it only gets smaller and eventually becomes 0.0000.

In the put column, it starts off at around -0.025 and only becomes more negative as you move down the column. As you move up the column, it becomes less negative until the values are all 0.0000.

IMPLIED VOLATILITY

In the neighborhood of the strike price, Implied Volatility seems to vary between about 15.00 to around 30.00, but it can get MUCH higher, and can go down to 0.00.

 

[expiated]

STRIKE PRICES

Strike prices get smaller as you go up the column. Consequently, the corresponding Call contract prices increase, because the indicative price, the value of the underlying stock, will be more and more in-the-money (farther and farther above the strike price).

Conversely, since the indicative price (the stock price) will still find itself higher and higher above the strike price as you move up the Put contracts, their premiums go down in price as you move up the column, because the chances that the stock price will be below the strike, which is what you want, is getting smaller and smaller (since the strike prices are all getting smaller).

Similarly, as you move down the Put column, since the strike prices are getting bigger, the chances that the stock price will be below the strike price at expiry is also getting bigger, so the premiums become more expensive.

https://papertrading.eoption.com/

 

[expiated]

Thirteen days before expiration the cost of a Call option directly above the indicative price was $3.85. Directly below, it was $2.33. For a Put contract, directly above was $2.04 and directly below was $3.13.

One day before expiration, the cost of a Call option directly above the indicative price is $2.15. Directly below, it is $0.59. For a Put contract, directly above is $0.25 and directly below was $1.16.

(AAPL has gone up by about ten bucks in the last two weeks.)

From what I've read, I have the impression that a Call contract can expire worthless even if the stock price is above the strike price at expiry. But when I search for an explanation as to how this can be, in the middle of the explanation it always switches to the stock price being below the strike price at expiration.

So, until I can get an explanation that I understand, I'm going to explore selling Put contracts, where I get the money up front and keep it so long as the stock price does not drop below the strike price by the expiration date (if I understand correctly).

I don't believe AAPL will fall by three bucks in one day, so let me see if that turns out to be true.

 

[expiated]

Of these four long put candidates suggested by a modified screener/filter, my first pick (for the short term) would be EMBC.
DIS - 79.78
ETSY - 63.17
STAA - 38.79
EMBC - 14.80

Candidates for long calls:
META - 294.94
CCJ - 39.16
DELL - 65.71
DXJ - 85.06

ALL of these stocks from October are up in price except for STAA.

 

[expiated]

I don't believe AAPL will fall by three bucks in one day, so let me see if that turns out to be true.

So then, I guess this order was never filled and I need to figure out what I have to do to make sure my orders ARE filled...

 

[expiated]

What are Monday & Wednesday Weeklies as relates to options trading and how do they work?

Monday and Wednesday Weeklies refer to specific types of options contracts that have a weekly expiration date, typically falling on a Monday or Wednesday. These contracts are part of the larger category of weekly options, which are options with a shorter time to expiration compared to standard monthly options.

Weekly options, including Monday and Wednesday Weeklies, provide traders with more flexibility and opportunities for short-term trading strategies.


Here's how Monday and Wednesday Weeklies work...


Expiration Frequency:

• Standard Monthly Options: These expire on the third Friday of each month.
• Weekly Options: These expire every week, typically on Fridays. Monday and Wednesday Weeklies specifically expire on the closest Monday or Wednesday.

Shorter Time Horizon:

• Weekly options have a much shorter time to expiration compared to standard monthly options. This makes them attractive for traders looking to capitalize on short-term price movements or events.

Flexibility:

• Traders can choose from a variety of expiration dates within a single month, allowing for more strategic trading based on upcoming events or market expectations.

Volume and Liquidity:

• The liquidity of Monday and Wednesday Weeklies may vary based on the underlying asset and market conditions. It's important for traders to assess the liquidity of these contracts before entering positions.

Strategic Trading:

• Traders might use weekly options for strategies such as earning plays, where they take advantage of short-term volatility around corporate earnings announcements. Additionally, they can be used for short-term hedges or speculative trades.

Risk Management:

• Due to the shorter expiration period, the premiums for weekly options can decay rapidly, leading to increased risk. Traders need to be mindful of this and manage their positions accordingly.

It's essential for options traders to conduct thorough research, stay informed about market conditions, and have a solid understanding of the risks involved when trading weekly options, including Monday and Wednesday Weeklies. Additionally, they should be aware of the specific rules and characteristics of these contracts on the exchange where they are traded.

(According to Woodley Funtanilla, Monday & Wednesday Weeklies were added for large indexes and ETFs like SPY, QQQ, IWM and SPX.)

 

[expiated]

Weekly options, including Monday and Wednesday Weeklies, provide traders with more flexibility and opportunities for short-term trading strategies.

Given my style of trading, I suppose it's likely I will only be interested in weekly options, though so far, I don't see Monday & Wednesday Weeklies offered on the papertrading.eoption.com platform. If I go to the section of the option chain that I have surrounded with a yellow box, I can choose weekly options there. I can also limit the number of contracts displayed to, I believe, a maximum of 12, and I can choose the expiration date. It looks to me like the darker shaded contracts are in-the-money and the lighter (gray) ones are out-of-the-money. So then, I need to come back on Friday to see how the numbers behave so I can determine if it would make sense for me to look into day trading weeklies on the last day of the week (i.e., if there is some way for me to do this profitably).

 

[expiated]

ChatGPT

If I were to day trade weekly options on the Friday they were scheduled for expiration, which types of contracts would return a profit at expiry, and which types of contracts would expire valueless?

Day trading weekly options on the day of their scheduled expiry can be highly speculative and risky. Options can be broadly categorized into two types: call options and put options. Here's a brief overview of how each type works and the potential outcomes at expiry:

Call Options:

• A call option gives the holder the right (but not the obligation) to buy the underlying asset at a specified price (strike price) before or at expiry.
• Profit at expiry: If the price of the underlying asset is higher than the strike price, the call option is in-the-money, and the trader can exercise the option to buy the asset at a lower price. The profit is the difference between the asset's current market price and the strike price.
• Expire valueless: If the price of the underlying asset is at or below the strike price, the call option is out-of-the-money, and it expires worthless.

Put Options:

• A put option gives the holder the right (but not the obligation) to sell the underlying asset at a specified price (strike price) before or at expiry.
• Profit at expiry: If the price of the underlying asset is lower than the strike price, the put option is in-the-money, and the trader can exercise the option to sell the asset at a higher price. The profit is the difference between the strike price and the asset's current market price.
• Expire valueless: If the price of the underlying asset is at or above the strike price, the put option is out-of-the-money, and it expires worthless.

When day trading weekly options on their expiry day, the key is to accurately predict the price movement of the underlying asset within a very short timeframe. It's important to note that options are highly leveraged instruments, and the potential for both gains and losses is amplified.

Additionally, the time decay (theta) of options accelerates as they approach expiry. Options lose value as time passes, and this decay is most significant as the expiration date approaches. Therefore, day trading options on their expiry day requires not only accurate market predictions but also quick execution due to the time-sensitive nature of the trade.

 

[expiated]

bing.com

If I were to day trade weekly options on the Friday they were scheduled for expiration, which types of contracts would return a profit at expiry, and which types of contracts would expire valueless?

When day trading weekly options on their scheduled expiration Friday, it’s essential to understand the dynamics of these short-term contracts. Let’s break it down:

1. Profitable Contracts:
   • In-the-Money (ITM) Options: These contracts have a strike price favorable to the current market price of the underlying asset. If you hold an ITM option, it will likely have intrinsic value at expiration. You can sell it for a profit or exercise it to buy/sell the underlying asset at a favorable price.
   • Near-the-Money (NTM) Options: NTM options have strike prices close to the current market price. They may also have some intrinsic value. If the underlying asset moves in your favor, NTM options can yield profits.
   • Covered Calls: If you own the underlying stock and sell a call option against it, you can earn premium income. If the stock price remains below the call’s strike price, the call will expire worthless, and you keep the premium.
2. Contracts That Expire Valueless:
   • Out-of-the-Money (OTM) Options: OTM options have strike prices far from the current market price. If the underlying asset doesn’t move significantly, OTM options will expire worthless. These are riskier but cheaper options.
   • Time Decay: All options lose value as they approach expiration. Weekly options are no exception. If you hold options that are far OTM or have little time value left, they may expire worthless.
   • Speculative Bets: Risky bets on extreme price movements (e.g., buying far OTM options hoping for a massive price swing) can lead to valueless expirations.

Remember, day trading options can be highly leveraged and volatile. Proper risk management, understanding the Greeks (delta, gamma, theta, vega), and having a well-defined strategy are crucial.

 

[expiated]