Weekly’s expirations are shorter than regular options.
You can target a more specific date and time period.
They are less expensive but may be riskier.
The Short-Term Advantage of Weekly
The ability to make a very short-term bet on a particular news item or anticipated sudden price movement.
The open interest and the volume of the weekly’s are large enough to produce reasonable bid-ask spreads, they are usually not as high as the monthly expirations.
For premium sellers who like to take advantage of the rapidly accelerating time decay curve in an option’s final week of its life, the weekly’s are a bonanza.
Whether you enjoy selling naked puts and calls, covered calls, spreads, condors or any other type, they all work with weekly’s as they do with the monthlies, just on a shorter timeline.
The Downside of Weekly Options
Because of their short duration and rapid time decay, you rarely have time to repair a trade that has moved against you by adjusting the strikes or just waiting for some kind of mean revision in the underlying security.
Although the open interest and volume are good, that is not necessarily true for every strike in the weekly series.
Some strikes will have very wide spreads, and that is not good for short-term strategies.
First Strategies
An investor can use weeklies as a pure play.
Because they do not remain open as long, the may involve somewhat less risk, but it is important to consider liquidity constraints, as many weeklies have smaller markets.
The lower risk of a shorter holding period is lost if the instrument is illiquid and the investor cannot trade the position when needed.
Second Strategies
Offsetting positions can be taken at certain times during the month between weeklies and monthlies.
When the options expiration of the monthly contract is nearly identical to the expiration of the weekly option, there may be a price difference that can be captured between the two.
Third Strategies
You could take a position in the monthly contract and take rolling positions in the weekly contract in the opposite direction.
The idea is to establish a consistent hedge against short-term market volatility but make sure that you factor in the higher transaction costs for getting in and out of the market more often.
Fourth Strategies
The last approach to using weekly options is to use them to supplement income from an underlying position.
This is often called a call writing strategy because the investor who owns the underlying instrument writes calls on that position and collects the premium.
If the underlying remains static or falls, the investors make a profit or mitigates losses.
If the underlying rises, he or she may miss some of the profit, but the downside protection is used to justify this risk.
