Weekly options have revolutionized options trading. These short-term contracts expire every Friday and offer unique opportunities for traders who want quick results without tying up capital for extended periods. However, their rapid time decay makes them a double-edged sword.
What Are Weekly Options?
Weekly options, often called "weeklies," are options contracts that expire every Friday. Unlike traditional monthly options that expire on the third Friday of each month, weeklies give traders a new expiration every single week.
Key Characteristic: Weekly options have very little time value, which means they are heavily influenced by stock movement and much less affected by implied volatility changes compared to longer-dated options.
The Options Clearing Corporation introduced weeklies in 2005, but they gained mainstream popularity around 2010. Today, weeklies are available on hundreds of stocks and ETFs, with SPY, QQQ, and major tech stocks seeing the highest volume.
Why Trade Weekly Options?
Weekly options offer several advantages that attract active traders.
Lower Premium Costs
Because weeklies have little time value, they cost less than longer-dated options. A weekly call might cost $1.00 while a monthly call at the same strike costs $3.00. This lower cost means smaller dollar risk per trade.
Higher Percentage Returns
When trades work out, percentage returns can be substantial. If that $1.00 weekly call moves to $3.00, you have tripled your money. The same move on the monthly call would only be a 100% gain.
Faster Theta Collection
Option sellers love weeklies because time decay is at its maximum. Theta decay accelerates dramatically in the final days before expiration. Selling weekly options lets you collect this decay faster than selling monthlies.
Event-Specific Trading
Weeklies are perfect for trading around specific events like earnings, Fed meetings, or product launches. You can position for the event without paying for time you do not need.
Popular Weekly Options Strategies
Several strategies work particularly well with weekly options.
Buying Weeklies for Directional Trades
When you have a strong short-term conviction, buying weekly calls or puts can offer explosive returns. The key is being right about both direction and timing.
Directional Trade Example
AAPL is trading at $180. You expect it to rally this week based on technical analysis.
- Buy the weekly $182.50 call for $1.50
- If AAPL moves to $187 by Friday, the call is worth at least $4.50
- That is a 200% return in less than a week
- Risk: If AAPL stays flat or drops, you lose the entire $1.50
Selling Weekly Credit Spreads
Credit spreads let you collect premium while defining your risk. Weekly credit spreads can generate consistent income if you choose strikes wisely.
Earnings Plays with Weeklies
Weekly options expire the Friday after earnings for most companies. Traders can buy straddles for volatility plays or sell spreads to profit from volatility contraction after the announcement.
Weekly Iron Condors
Selling weekly iron condors on indexes like SPX can generate income from time decay while limiting risk. The short timeframe means less exposure to large market moves.
The Risks of Weekly Options
Weekly options are not for everyone. The risks are significant and must be understood.
Rapid Time Decay
Time decay works against buyers at an accelerating rate. A weekly option can lose 50% of its value in just two days even if the stock price does not move. This makes timing critical.
All-or-Nothing Outcomes
Weeklies often result in either significant profits or total losses. There is less middle ground compared to longer-dated options where you might still have value to recover.
Higher Transaction Costs
Trading weeklies often means more frequent trading, which increases commission costs and bid-ask spread losses. These costs eat into returns over time.
Temptation to Overtrade
The excitement of quick results can lead to overtrading. Many traders blow up accounts by sizing positions too large or trading too frequently with weeklies.
Warning: Studies show that most retail traders lose money trading weekly options. The combination of rapid time decay and precise timing requirements makes consistent profitability challenging.
Best Practices for Trading Weeklies
If you decide to trade weekly options, follow these guidelines to improve your odds.
Trade Liquid Options
Stick to stocks and ETFs with high options volume. SPY, QQQ, AAPL, TSLA, and other major names have tight bid-ask spreads. Avoid illiquid weeklies where the spread alone can cost you several percent.
Size Positions Appropriately
Never risk more than 1-2% of your account on any single weekly options trade. The high probability of total loss means you need many trades to be profitable overall.
Have an Exit Plan
Know before you enter when you will take profits and cut losses. With weeklies, waiting for "one more day" often turns winners into losers due to time decay.
Avoid Fighting Time Decay
If a weekly trade is not working by Wednesday, consider closing it. Fighting theta decay in the final two days rarely works out.
Timing Your Weekly Options Trades
Timing matters more with weeklies than any other options. Here are key timing considerations.
- Monday: Full week of time value remaining. Best day to enter if you want maximum time
- Tuesday-Wednesday: Time decay accelerating. Good for sellers
- Thursday-Friday: Extreme time decay. Buyers face steep headwinds
Many professional traders sell weekly options on Monday or Tuesday and buy them back by Thursday, capturing the bulk of time decay while avoiding expiration risks.
Weekly Options vs Monthly Options
The choice between weeklies and monthlies depends on your trading style and objectives.
- Choose weeklies when: Trading specific events, need lower premium cost, have high conviction on short-term direction, or selling premium for quick theta collection
- Choose monthlies when: Need more time for thesis to develop, want less dramatic time decay, prefer better liquidity, or are learning options
Many experienced traders use both, selecting the appropriate timeframe based on each specific trade setup.
Track Your Weekly Trades
Pro Trader Dashboard helps you analyze which timeframes work best for your trading style. Track weekly versus monthly options performance and optimize your strategy.
Summary
Weekly options offer exciting opportunities for short-term traders. Their low cost, quick resolution, and event-trading capability make them popular. However, the rapid time decay and all-or-nothing nature require disciplined risk management. Start small, trade liquid underlyings, and always have a clear plan before entering weekly options positions.
For longer-term perspectives, explore our guides on monthly options expiration and LEAPS options.