How the new 5 consecutive Weekly Option schedule changes Earnings trades

One of the exciting changes to Weekly Options is the addition of 5 consecutive Weekly Option expiration on stocks. I first wrote about this here regarding how this would enhance short-term trading in stocks using $AAPL as an example.

This week we had an earnings event in $RIMM and it just so happened that this new schedule was available for this stock. Awesome. Because I frequently use Options to do pre-earnings trades, this added a LOT more choices in constructing a trade.

I ultimately settled on this trade:

I wanted to be long with uncapped upside, and I wanted good downside protection at a low-cost. Here is a breakdown:

  • Long the stock
  • Short the January 4 13.5 Put
  • Long the January 11 13.5 Put
  • This Put Calendar cost me $.16

Without the availability of all Weekly’s up to the January Monthly expiration, I would have only had the choice of using the following Weekly & Monthly expirations. This flexibility allowed me to shorten my time-frame on the Put Calendar but still providing the protection I wanted since this is an event trade. What a deal.

Here is how the trade unfolded:

I did a few short stock scalps post-earnings as price fell through the 13.5 Put strike area. I remain long this Put Calendar.

 

Weekly Option schedule: http://www.cboe.com/micro/weeklys/availableweeklys.aspx

 

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