One way to trade weekly options that could be considered ‘less risky’ – at least when compared to other similar ways of trading – is to go out and purchase a LEAP option – use that as the foundation for the trade – then start to sell weekly options against it – similar to how one might trade a covered call trade.
Trading LEAPS along with Weekly Options
When you break the word LEAPS down you find that it stands for: ‘long-term equity anticipation securities’. These trading vehicles can have life spans from a couple of months to many months and in some cases even years. Another interesting point regarding these particular trading vehicles is that in actuality they are not even ‘options’ – but in fact they are actually ‘securities’.
I once heard a professional option trader say that he thinks of LEAPS is that they are a way to ‘lease’ or ‘rent’ the underlying stock or etf being used instead of buying the actual stock. LEAPS are probably the closest thing you can find to benefit from the rise or fall in a stock without actually owning the stock itself – and you can do so with a great amount of leverage, at a far lower cost, and with a potentially much bigger return – or bang for your buck.
AAPL example using LEAPS and Weekly Options.
Let’s create an example where a trader decides to make a position in AAPL – but doesn’t have the amount of money needed to purchase the stock. What he can do instead is purchase an AAPL LEAP for far less that what the stock would cost – and still have the ability to take advantage of a move in the stock.
Another great weekly options strategy that can be used will LEAPS options is use them as a stock ‘surrogate’ for a covered call type of position. Instead of using the actual stock as the base position for a covered call play – a LEAP can be used – and then the option trader can sell weekly options against that leap – potentially every single week – bringing in premium much like a covered call type position only with much less capital at risk. Also, if you were to compare these two strategies against one another – you would most likely find that the return on investment is far greater when using the LEAPS weekly options version.
Teddy Baby is an option selling fanatic – mainly addicted about trading Weekly Options . Visit Weekly Options Website to find out more about his Undemanding Paint By The Numbers Design for riding the weeklys for consistent returns.