Exploring the Weekly OptionsCME: E-Mini Nasdaq 100 Weekly Options ($Q1D-$Q5D)
When I first started trading two decades ago, I was overwhelmed by the amount of data that was available. I had a hard time correlating how data relates to price movement. While observing the stock market, I have one question in particular: why does the market often moves drastically immediately after the release of a major report?
Over time, I learnt that these reports provide insight into how the economy works. New data validates our assumptions about the future. Take the United States as an example:
• Consumers drive the U.S. economy;
• Consumers need jobs to be able to buy things and keep the economy going;
• The ebb and flow between the degree of joblessness and full employment drive economic activity up or down;
• How easy or difficult for households and businesses to get credit affects consumption, jobs, and investment.
The following reports have an outsized impact on global financial markets:
• The Nonfarm Payroll Report, released by the Bureau of Labor Statistics (BLS);
• The Consumer Price Index, also published by the BLS;
• Personal Income and Outlays, by the Bureau of Economic Analysis (BEA);
• Gross Domestic Product (GDP), also by the BEA;
• Federal Open Market Committee (FOMC) meeting, this is where the Federal Reserve sets the Fed Funds interest rates, ten times a year;
• Interest rate actions by other central banks, including European Central Bank, the Bank of England, the Bank of Japan, and the People’s Bank of China.
Binary Outcomes: Ideal Setting for Options Trading
For these highly anticipated reports, investors usually reach a consensus on the expected impact of the new data prior to its release. Market price tends to price in such investor expectations.
The next FOMC meeting is on September 20th. According to CME Group’s FedWatch tool, the futures market currently expects a 94% probability that the Fed would keep the Fed Funds rate unchanged at the 5.25%-5.50% range.
The September contract of CME Fed Funds Futures (ZQU3) is last settled at 94.665. This implies a Fed Funds rate of 5.335%, right in the middle of the target range.
When new data is released, investors focus less on the actual data, but more on how it compares to the consensus. Because the prevailing price already reflected market expectation, new data serves to either confirm or dispute it. We could use a range of -1 to +1 to categorize these outcomes:
• Well Below Expectations, -1;
• Meet Expectations, 0;
• Well Above Expectations, +1.
The sign of the outcome does not necessarily correspond to a positive or negative price movement. It differs by the type of data and the respective financial instrument.
We could further simplify the results into binary outcomes:
• Within Expectation: 0, where actual data approximates previous expectation;
• Beyond Expectation: 1, either below or above expectation by a pre-defined margin.
Both human and computer think in binary terms: Light switch On or Off, Price goes Up or Down, Risk turns On or Off. In derivatives market, we could buy a Call Options if we expect the price to go up, and a Put Options if we think the price will decline.
Weekly Options for Event-Driven Strategies
The FOMC meeting is the most significant event that affects global markets. Market may stay calm if the Fed keeps rate unchanged (within expectation). However, if the Fed raises rate unexpectedly, you could hear investors screaming all around the world!
To trade the Fed decision, investors could form different strategies using a wild variety of instruments, such as stock market indexes, Treasury bonds, forex futures, gold, WTI crude oil, and even bitcoin. Today, we focus on the Nasdaq 100 index. Here are some alternatives to consider:
• Nasdaq 100 ETF: many asset managers offer them, including Invesco, iShares and ProShares. From a trader’s perspective, ETFs offer no leverage. A $100K exposure requires $100K upfront investment. If the market moves up 1%, you also gain 1%, minus the fees.
• Nasdaq 100 Futures: CME Micro Nasdaq 100 ($MNQ) has a notional value of 2 times the index, valuing it at $31025, given the Nasdaq’s last close at 15512.5. Each contract requires initial margin of $1680. The futures contract is embedded with an 18.5-to-1 leverage.
• Nasdaq 100 Options: As the nearby September contract expires on the 3rd Friday, or the 15th, ahead of the FOMC meeting date, we could not use it for our strategy. Instead, we could apply it with the December contract ($NQU3). On September 1st, the 15800-strike Call is quoted $541.50, and the 15400-strike Put is quoted $535.
• Weekly Options: On September 1st, the 15800-strike Call to expire in one week is quoted $14.25, while the 15400-strike Put to expire in one week is quoted $54.50.
Premiums for the standard American-style Options are expensive. They come with quarterly contracts and quarterly expirations. While our target date is September 20th, we have to use the December contract and acquire 3-1/2-month worth of time value.
Weekly options, on the other hand, offer more precise trading and risk management with more expirations. Investors pay low premium to get the exposure they need and avoid the unnecessary and costly time value.
For E-Mini Nasdaq 100, the weekly options that expire on Wednesday, September 20th will be listed on the prior Thursday, September 14th. If an investor forms an opinion about the FOMC decision, he could implement it with a weekly call or put next week.
Nasdaq Weekly Options are deliverable contracts. If an investor owns a call and it expires in the money, he will settle the contract with a long position in E-Mini Nasdaq 100 futures. Likewise, if he owns an in-the-money put, he will get a short futures position.
If the market moves in favor of an investor’s expectation, the potential payoff could be significant due to the leverage in weekly options. If the investor is incorrect, he could lose money, up to the amount of the entire premium. However, the low-premium nature in weekly options helps contain such loss at a tolerable level.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Weeklyoptions
Weekly expiry candle over calendar week candleWeekly options expire on Thursday. If we look at weekly candle it starts on Monday and ends on Friday. My idea was to create a candle for a particular expiry week (starts on Friday and ends on Thursday) to view any different price action in an expiry week.
I have created a script to do that and find some significant price action views.
The script is available in Pine public library and also included a link to the script.
I am researching this now. Please give me your feedback and view.
Link:
Nifty Levels & Strategy for 21/Oct/2022Dear traders, I have identified chart levels based on my analysis, major support & resistance levels. Please note that I am not a SEBI registered member. Information shared by me here for educational purpose only. Please don’t trust me or anyone for trading/investment purpose as it may lead to financial losses. Focus on learning, how to fish, trust on your own trading skills and please do consult your financial advisor before trading.
NIFTY
Nifty closed in green and Bulls are trying hard to retain the control & continue with ongoing relief rally. Today, once again Bears as well as Bulls were rewarded who traded based on good quality setup. Buy on only when price action indicate you to buy & vice versa in case of sell. Weakness in Indian Rupee is hurting Indian traders. Nifty & Bank Nifty are trading in opposite directions. We have Diwali two days of Diwali vacation prior to October expiry. Please avoid trading (specially buying) in weekly options.
Bulls have slightly upper hand based on OI data. Shall we continue to buy on dips & sell on rise with strict SL untill market trend is clear? Yes, I think so. Please share your thoughts.
NIFTY SCORECARD DATED 20/OCT/2022
NIFTY IS UP BY 52 POINTS
Name Price Previous Day Change % Change
Nifty 17564 17512 51.70 0.30%
India VIX 17.23 17.49 -0.25 -1.46%
OPTION STATISTICS BASED ON 27/OCT/2022 EXPIRY DATA
Max OI (Calls) 18000 (Open Interest: 6777500, CE LTP: 11.95)
Max OI (Puts) 16500 (Open Interest: 5910800, PE LTP: 4.6)
PCR 1.17 (PCR is in buying Zone)
Nifty Calls:
ATM: Long Buildup, OTM:Short Buildup, ITM:Long Buildup, FAR OTM:Short Buildup
Nifty Puts:
ATM: Short Buildup, OTM:Short Buildup, ITM:Short Buildup, FAR OTM:Short Buildup
STOP Playing Weekly Options Lottery: Backtest Proven!Since 2020 the retail trading market has exploded with Weekly Options buying. Weekly Options are "cheap" and can, occasionally, give their buyers big exciting wins. Do they make sense over the long run? NO! A backtest of NASDAQ:TSLA proves that over the long run options are PRICED EFFICIENTLY to make traders lose and underperform buying shares!
GOOGL Weekly OTM play: 25 pts with 3 days to go?Today NASDAQ:GOOGL —
-fights off pop and fade
-breaks out of 2-day wedge
-climbs channel, topside.
Still work to do, but holding Jan. 11 expiry 1110c @2.50 because:
-today's performance
-moving averages momentum
-QQQ outlook.
If Trump evening speech has any effect, it will be upside, because:
-manipulator-in-chief.
50% PROFIT DAYTRADING SPY WEEKLY OPTIONSDAYTRADING THE SPY
BOUGHT SPY 217 CALL AT $1.00
SOLD AT $1.50
FOR A 50% PROFIT
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
topandbottomtradesignals.net
News event profit 2000% profit 20 bagger SPY 212 CALLIf you had bought the SPY 212 CALL at $.04 at the end of the day yesterday
and sold at the high so far today of $.92
you could of had a 2000% profit that's with 3 zeros
A 20 bagger in one day.
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
www.topandbottomtradesignals.net
JOBS REPORT POSSIBLE SIGNIFICANT MOVE SPY STRADDLEPossible significant move up to and beyond 212.50
or a drop back to 207 support and below
SPY STRADDLE
SPY JULY 8 212 CALL @ $.15
SPY JULY 8 209 PUT @ $.30
Equal amounts invested in each
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
www.topandbottomtradesignals.net
SPY HEAD AND SHOULDERS DOWNSIDE TARGETHead and Shoulders heights gives a target of 198
SPY MAY 27 203 PUT @$1.25
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
topandbottomtradesignals.net
SPY Short term targets with breakouta to the upside 205 then 208Looks like SPY wants to go to 208 based on measuring height of double bottom coil and trend line at 208
If SPY breaks out above 203 to the upside 205 then 208 could be targets
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
topandbottomtradesignals.net
SPY WEEKLY OPTION BOUGHT ON BREAK OF 204 SUPPORTSPY WEEKLY OPTION BOUGHT ON BREAK OF 204 SUPPORT
SPY APR 8 204 P @ $.90
bought on break below 204 support
Also proprietary TOP signal received this morning
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
topandbottomtradesignals.net
50% PROFIT ON STRADDLE SO FAR50% PROFIT SO FAR ON SPY STRADDLE
SPY APR 8 203.50 P @ $ 30
PUT HIGH OF THE DAY &.88
CALL PORTION OPENED AT $.09
for a total high price of the day $.97
so far for the straddle
FOR A 50% PROFIT SO FAR
APRIL 4 STRADDLE
SPY APR 8 208 C @ $ 33
SPY APR 8 203.50 P @ $ 30
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
topandbottomtradesignals.net
SPY WEEKLY OPTION STRADDLE FOR NO REASONAPR 4 SPY WEEKLY OPTION STRADDLE
Here's a straddle for no particular
reason other than we are between
support and resistance
and one might not hold
206 and 207
APRIL 4 SPY STRADDLE
SPY APR 8 208 C @ $.33
SPY APR 8 203.50 P @ $.30
Equal amounts invested in each
TOTAL COST .$.63
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
topandbottomtradesignals.net
NEWS EVENT SPY STRADDLE JOBS REPORT 80% PROFITNEWS EVENT SPY STRADDLE JOBS REPORT 80%
OPTION PRICES UPDATE
SPY APR 1 207 CALL BOUGHT AT $.30 NOW $.01
SPY APR 1 205 PUT BOUGHT AT $.30 HIGH FOR THE DAY SO FAR $1.10
Equal dollar amounts invested in each
$.60 cost
$1.10 Combined high for the day so far 80% profit
High was just after the open of trading.
A trailing stop would have locked in those profits
Spy Weeklys In the Money,At the Money or Out of the Money?Spy Weeklys In the Money,At the Money or Out of the Money? What strike price is the best to trade for max bang for the buck? First you have to get the direction right and assuming you did that next you have to decide which strike price is the best to play for max profit in a short time period. Attached is a chart that shows the SPY trades we followed over 2 weeks that we were mostly out of the money with one trade at the start the SPY 191.50 CALL bought at $2.00 then sold at $3.85 for a 90% profit. We noticed that the out of the money option were up around 200% in one day. So the at the money was profitable but the out of the money options were noticeably more profitable. During the following 2 weeks we followed mostly out of the money options with remarkable profits. On Thursday March 3 2016 we followed 2 options bought on Thursday when we got a bottom signal. They were out of the money options, one option was SPY Mar 11 201 CALL bought at $.90 that had a high for the day of $1.74 on Friday for a 90% profit.
We usually follow options with at least 2 full trading days to expiration to allow time for the option time to play out. But on Thursday we decided to also followed an out of the money option with less than 2 days to expiration which we called The Gambler it was a SPY Mar 04 200 CALL bought at $.40. We decided on the 200 strike because we wanted something that was out of the money but had a chance of getting in the money. It got to $1.36 for a high and a 240% profit. The bottom line is the out of the money options apparently have the greatest profit potential but you have to be aware of the risk involve especially as you approach expiration and the accelerated time decay on Thursday and Friday the week of expiration
RISK DISCLAIMER
Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.
topandbottomtradesignals.net
How to Profit Regularly with SPY Weeklys Playing the SwingsThere are numerous opportunities every month to profit from the swings in the minute charts if you can find those trading
entry and exit points. If you know if you are looking at a top or bottom of a swing you greatly increase the odds you are trading in the right direction and knowing when you at the other end of your trade can help you maximize you profit.
Whatever you are trading knowing when the conditions technically ripe for a change can be monumental to your success. the attached charts show how the charts show entry and exit points and what kind of success you can have.
I have numerous example of signals and trades on website for you to checkout.
topandbottomtradesignals.net