Profiting from Weekly Options. Seifert Robert J.

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      Robert J. Seifert

      Profiting from Weekly Options

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      PROFITING FROM WEEKLY OPTIONS

      How to Earn Consistent Income Trading Weekly Option Serials

      Robert J. Seifert

      Cover image: © iStock.com/adam smigielski

      Cover design: Wiley

      Copyright © 2015 by Robert J. Seifert. All rights reserved.

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

      Published simultaneously in Canada.

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       Library of Congress Cataloging-in-Publication Data:

      Seifert, Robert J.

      Profiting from weekly options: how to earn consistent income trading weekly option serials / Robert J. Seifert.

      pages cm. –(Wiley trading series)

      Includes index.

      ISBN 978-1-118-98058-3 (Hardcover) – ISBN 978-1-118-98095-8 (ePDF)–ISBN 978-1-118-98094-1 (ePub) 1. Options (Finance) I. Title.

      HG6024.A3S437 2015

      332.64′53–dc23

      2014037475

To Ryan, Aly, and Steph, how could I be so lucky?

      Foreword

      Todd “Bubba” Horwitz

      I first walked onto a trading floor at the CBOE in September of 1982. I was 24 years old and I knew that I wanted to be involved in the option market. I was one of the original market makers in the SPX, and it was quite a thrill. When you trade for a living, every day is a new adventure; you never know what is going to happen next but you know that it will be interesting. Over 30 years later, I still can't wait for the opening bell!

      So much has changed since I started to trade that it isn't the same business anymore. Now there is really no open outcry, the markets have shifted upstairs to the electronic platforms, and the trading pits are almost empty. When I started to trade, the option markets only had four expirations per year. Gradually, the powers that be figured out that if you had an expiration each month, that would bring more customers into the markets and provide greater liquidity. Another major policy change was to narrow the bid–offer spreads to $1, and that brought even more business into the market. All of the changes made it better for the retail customer.

      In 2010, the SEC decided that it would allow customers to trade options on a weekly basis, bringing the expiration total to 52 times a year. Finally, three years ago, the exchanges were approved to list weekly options that would fill out the rest of the month so that they could be used for calendar spreading and rolling positions back one week instead of one month. The weekly option market has grown so much in the last year or so, it is now liquid enough to allow the retail trader to compete with the giants of Wall Street.

      I am very pleased to have helped to educate scores of students on how to successfully integrate weekly options into their arsenal of trading tools, and I am very happy to be a part of this book. I have known Bob Seifert for more than 25 years, and we have collaborated on a great number of projects. I personally think that weekly options are the best investment tool that I have seen in that time. They are so versatile it is hard to believe that it took so long to bring them to the marketplace. If you have a stock position in place, the weekly options can be used to hedge your risk. If you have cash that is on the sidelines and you want to enhance your yield, weekly options offer you that opportunity, and if you want to speculate, the weekly options offer you the best possible opportunity.

      When you read this book, you will probably need to study the material several times to take full advantage of the concepts presented. Anything that is worthwhile takes effort, and learning to trade weekly options is no different. Although the trades are very basic, they will offer you the chance to make money in any market condition.

      I wish you good luck in your trading, and I can assure you that if you have the patience to learn the principles presented in this book, you will make your own luck!

      Preface

      For many years, it was difficult for individual option traders to compete with the banks and professional market makers in the derivative market. The bid–offer spreads were too big, the premium levels were so high that a retail trader could not afford to be involved, and finally, if their trade of choice was spreading, they had to wait months for the trade to mature.

      Four years ago, weekly options didn't exist, and now they represent more than 30 percent of all options traded. There must be a reason for the phenomenal growth in such a short period of time. There is a reason, and it is very simple: Weekly options offer the best opportunity for any retail trader to get involved in the derivative market. This book is designed to reach any level of option trader, from the novice to successful traders that have yet to learn the power of weekly options.

      The book is organized into sections, and after each