The trade has very little risk to the weekly options strategy and is limited to the premium paid. The idea is that traders sell credit spreads or iron condors on options expiring on the same day.
You get paid in a short amount of time and then wait to set up the next income trades. By selling short-term premium options valuewe are taking advantage of the option's rapid time decay.
I know a few traders who use this as their main strategy to trade for a living. There are also methods you can use to create stop loss orders so the trade should never experience a max loss even if it is a particularly volatile day. Using SPX options has an advantage in that there is no assignment risk because the options are cash settled.
They are also highly liquid with tight bid-ask spreads. Conclusion Weekly options provide a lot of flexibility for traders, but they are not without risks.
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Small price moves in the underlying stock can potentially have a large impact on a weekly trade. Monthly trades tend to move a lot slower, but the weekly options strategy decay is also slower.
Safest Weekly Option Selling Strategy - Theta Gainers - Expiry 24th December 2020
Weekly option strategies can be great for active traders who have the time to place and manage lots of different trades. For those that are working full time or not in front of a computer much during the day, weekly strategies become much more difficult.
The strategy presented would not be suitable for investors who are not familiar with exchange traded options.
Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
So, the benefit of having a new and growing market of speculators is that we have the ability to take the other side of their trade. I like to use the casino analogy. The speculators buyers of options are the gamblers and we sellers of options are the casino. And as we all know, over the long term, the casino always wins. Because probabilities are overwhelmingly on our side.