Why Wait? How You Can Collect “Weekly” Profits…

If you ask most successful investors the best way to sustain consistent profits, most will tell you the key is to diversify.

What exactly does this mean?

Some will tell you to spread your investments over different industries and markets.  This is good advice.

Others will tell you to have a portfolio that holds both large and small-cap stocks. Also good advice.

And then there are those who will tell you to have both long and short-term strategies within your portfolio…

None of these ideas are wrong. It is all good advice. And, with a little time and research, you can certainly follow all three.

#-ad_banner-#Today I want to talk to you about a new short-term strategy. A way you can collect profits weekly on swings in the market.

Last week, Steve Sarnoff joined us to talk about how you can profit with options using Superleverage. As you may remember, Superleverage allows you to profit on a stocks price movement.  Options are the key tool. You can collect profits whether the price of a stock goes up or down.

But most options you buy are for months out. If you buy an option today, you may not see profits until August. And—in order to profit, you have to analyze and decide what that market is going to do over the next few months.

What if you could shorten that time frame? What if you could still use Superleverage to profit… but you only had to decide what you thought a certain stock was going to do over the next week?

Just within the last few years, the Chicago Board Options Exchange (CBOE) started testing a new way of investing that allows you to do just that.

Weekly options, or weeklys, are a brand new way to profit from the ups and downs of the market. They behave just like monthly options, except they only last for a week. This allows you to focus on short-term price movements.

Just like with options, with weeklys you buy puts or calls. You would buy a put if you think the stock is going to go down.  You can purchase a call if you think the stock is going to go up.

Unlike monthly options though, you only have a week. New weeklys are listed every week on Thursday.  They expire the following Friday. Please note that weekly’s will not expire the same day as monthly options (the third Friday of the month). So weeklys will not be listed for that week.

Also unlike monthly options, weeklys aren’t as widely used. Because of this, weeklys aren’t listed on every stock. But more and more are added every week.

Weeklys are listed for many underlying financial securities. They allow you to bet on the price movements of market indexes, ETFs, and some stocks.  (You can find a list of available weeklys right here.)

Because weeklys last only one week, you have the opportunity to profit from very short-term price movements from something in the news, a earnings release, or a sudden price movement.

These short-term plays not only allow you to focus on short-term movements… but they are also generally cheaper than a regular monthly option.

Although interest in weeklys has grown since 2009, it is still a very new investment tool. I would check with you broker to see if they allow trading weeklys. (Some discount brokers, like TD Ameritrade and Interactive brokers, do.)

Granted, every type of investment carries risk. Weekly options are no different. And I would never recommend jumping into this arena without doing a little more research. The Chicago Board Options Exchange has a great tutorial on weeklys right here.