VXX Weeklys Begin Trading Tomorrow

Thanks to a tweet from Adam Warner of the Daily Options Report for alerting me to the fact that VXX options have just been added to the list of 28 indices, ETFs and stocks on which the CBOE is now trading weekly options, or as the exchange calls them, weeklys.

The VXX ETF and VXX options are two subjects I have covered in considerable detail over the course of the past two years, so rather than repeat myself, I will encourage readers to start with the links to older posts on the subject toward the bottom of this post or refer to the keyword links herein and labels at the very bottom of this post.

Weekly options are the new kid on the block and something I jumped on early and have enjoyed, particularly as someone who has been an aggressive seller of options over the course of the last 1 ½ years. Again, there are links above and below for readers to find some of what I have said on the subject to date.

I should also note, however, that the August issue of Expiring Monthly: The Option Traders Journal (published on Monday) has three articles on weekly options, including a guest article from Vance Harwood of the Six Figure Investing blog. Farther afield, Steven Sears of Barron’s tackles the subject of weeklys in today’s The Striking Price column: The Weeklys Get Stronger.

Below I have included a watch list I set up on Livevol Pro that has this week’s 28 weekly options plus next week’s addition, VXX, sorted by call volume. Note that VXX replaces Dendreon (DNDN) and brings the current breakdown of weeklys to 12 equities, 11 ETFs and 5 indices.

Related posts:

• Weekly Options Gain Momentum
• What a Difference a Weekly Makes
• Record Call Activity in VXX
• VXX Calls Attracting Interest
• Chart of the Week: VXX Options
• CBOE Launches Options on VXX and VXZ
• Why the VXX Is Not a Good Short-Term or Long-Term Play
• VXX Calculations, VIX Futures and Time Decay

[source: Livevol Pro]

Disclosure(s): short VXX at time of writing; Livevol is an advertiser on VIX and More

Weekly Options Gain Momentum

Up until a couple of weeks ago, it was almost impossible to find anyone who thought it was worthwhile to mention weekly options: options that have the same terms as standard monthly options, except that they expire on every Friday other than the third Friday of the month (which is when standard monthly options expire.)

For those who find the definition above a little too sparse, the CBOE has an excellent FAQ for weeklys; the Options Industry Council (OIC) also has a weekly options FAQ for those who wish to learn a little more about these products.

Some of my fellow bloggers have already taken up the cause of weekly options and have shared some of their initial thinking on the subject:

• Weekly Options for the Masses – SPX, QQQQ, IWM, DIA and Others (Six Figure Investing)
• Weekly Options Could Affect Stock Prices (Adam Warner, InvestorPlace)
• WeeklyOptionPalooza (Adam Warner, Daily Options Report)
• Weekly Options and Pinning Effects (Steve Place, Investing With Options)

Before anyone gets too excited about new products, one of the first questions is invariably about liquidity and market depth. Rest assured, there is already substantial liquidity and market depth in the weekly options being offered. In the table below, I have calculated today’s volume in weekly options and standard options for the two at-the-money strikes for all the weeklys listed by the CBOE. Note that for the most part, the weekly options volumes are running at about one third to one half of the rate of the standard monthly options. In the case of IWM and DNDN, today’s weekly volume exceeded the volume in the monthly options.

For the record, I made my first weekly option trade last week and I was excited because it was a trade I never would have made unless it was near the end of an expiration cycle – a time frame many options traders avoid, but I like to embrace. Given the increasing popularity of weekly options and new end-of-cycle trading opportunities, I would recommend that anyone who has not already done so to spend some time with Jeff Augen’s excellent Trading Options at Expiration, where many of Jeff’s ideas can now be applied on a weekly basis.

I will have a lot to say about weeklys (blame the CBOE for the spelling choice) going forward. In the meantime, readers looking to learn more about these products should start with the CBOE Weekly Options splash page.

[source: CBOE, Livevol Pro]

Disclosure(s): long IWM at time of writing; both the CBOE and Livevol are advertisers on VIX and More

CNBC Million Dollar Portfolio Challenge: #107,526

OK, so the graphic may be a little over the top, but at the beginning of the week I was #1047 and now it seems that all there is left for me to do is to have some more fun with the earnings spike potential algorithm.

With 1,598,913 contestants in this crazy contest, I can still stake a claim to the top 7%, but at the rate my portfolio is sinking, my ultimate goal may be to try to scramble back into the top 100,000.

The final damages from yesterday’s ride on OTEX turned out to total a 3.8% loss. For today, I listened to the algorithm for a change and hopped aboard LeapFrog Enterprises (LF). So far this is my best pick of the week…(wait for it)…down a mere 1.6% today.

With the always thin weekend, one has the opportunity to take a flyer on an M&A target (maybe Options Doggy can sniff one out), play for some Dendreon (DNDN) news, or go my standard earnings route. The earnings pickings are slim, but the algorithm generated the top four picks for Monday as follows:

1. Flamel Technologies (FLML)
   
   
2. Delta Petroleum (DPTR)
   
   
3. Cogent Communications Group (CCOI)
   
   
4. Kinross Gold (KGC)

For the record, I think Delta is a fascinating exploration and production play that is a good fit for someone who likes to swing for home runs. I have owned it in my real money portfolio for over a year and have traded around it a great deal too. For what it’s worth, I have also owned and traded Flamel since last October and still like the prospects for this biotech/drug delivery play. Once again, I’m going to follow the recommendation of the algorithm and go with FLML for Monday.

Next week is the final week for the CNBC contest and I intend to finish on a strong note.

CNBC Million Dollar Portfolio Challenge: #1227

It was just a matter of time before my string of good fortune came to an end, but for all practical purposes, it probably should not have been today. Still, at #1227 out of 1,441,536 contestants as of last night, I have managed to hold on to a top 0.1% rating for one more day.

Scrolling back a little, my current position is the result of a 2.8% loss in Wright Medical Group (WMGI) yesterday, putting an end to a nice run of six straight days of gains of 2% or more. As I described earlier, I had carelessly thought WMGI would report earnings before the market opened or during the day yesterday, but this turned out not to be the case. Had I held on to WMGI, I would be sitting on what is currently a 6% gain, but instead, I went back to my earnings spike potential algorithm. This handy tool had helped pick the six consecutive winners and had pointed to a couple of other big movers as well. Yesterday it spit out Atheros Communications (ATHR), currently up 7%, as the top choice. Between WMGI and ATHR, how could I go wrong? Well, I got cute and thought I might be able to get even more volatility out of i2 Technologies (ITWO), whose dangerous coiled spring cocktail includes a huge beta (over 10 on Yahoo), an equally impressive short position of 13.1 days to cover, and an implied call volatility of 60. Well, I got the volatility I wanted, but I missed out on the direction, as ITWO is trading down 28% this morning. It is only a small consolation to know that the algorithm seems to be working…

Depending upon how far I fall down the ranks today, I will make a determination whether I should roll the dice one final time with the likes of Dendreon (DNDN) in hopes of rocketing my way into the finals or just play for a respectable position, such as the top 1%. I know that this is only play money, but after having come this far, it seems silly to spend it all on one last lottery ticket.