I love to hear how I can help the OptionSIZZLE family. Through emails sent to me and feedback surveys, I am able to get a better feel of what option investors are curious about and/or struggle with. I’ve learned over the last five years it takes time for people to warm up to you and be able to express what they are having issues with. So if you’re on the fence still, no worries. I’ll be here when you’re ready.

1. What Are The Best Stocks To
Trade Weekly Options?

2. I love to hear how I can help the
OptionSIZZLE family. Through emails sent to
me and feedback surveys, I am able to get a
better feel of what option investors are
curious about and/or struggle with.
I’ve learned over the last five years it takes
time for people to warm up to you and be
able to express what they are having issues
with.

3. So if you’re on the fence still, no worries. I’ll be
here when you’re ready.
Usually the articles will follow an order of the
most commonly asked first.
Without further ado…..
Q: What Are the best stocks to use for weekly
options?

4. Now, weekly stock options offer a
tremendous amount of opportunity for
trading and hedging purposes. There are
literally hundreds of tradable weekly options
at your disposal.
How do I narrow them down and focus on
the ones that offer me a fair chance at
becoming successful?

5. Simple. I only trade weekly options that
offer a competitive bid/ask spread.
Remember, in the open market, there are
two prices for an option–the price someone
is willing to pay–and the price someone is
willing to sell that option.
When the buyer and seller agree on a price,
a transaction is made.

6. I want the difference between the bid and
ask price to be tight (not too far apart from
each other).
By the way, stock option bids and offers can
be altered in penny, nickel or dime
increments.

7. Weekly Options Examples:
Facebook (FB) options allow you to adjust your
bid or offer in penny increments.
The Priceline Group (PCLN) options allow you to
adjust the bid or offer in dime increments.

8. I bring this up because I’ve heard some traders
say that you should stick to trading options
where the bid and ask can be adjusted in penny
increments because they are competitive.
That’s great advice and can save you a lot of
money at the end of the year.
However, focusing just on penny wide spreads
will limit your options…….

9. I want to share with you another approach that
will provide you a few more opportunities,
while still keeping you out of the bad ones.
How can we tell if a weekly option bid/ask
spread is competitive then?
I use a simple but powerfully effective market
maker technique. I judge the bid/ask spread by
the vega of the option.

10. Now, this might sound complicated…but it’s really
not. Let me show you.
Here is a snapshot an option chain of Apple weeklies
(only calls displayed). On my option chain, I have the
bid and ask price displayed…along with the vega of
the calls (displayed cVega in the image).

11. OK–so what I’m looking for is the difference
between the bid/ask spread to be less than
or equal to the vega of the option for it to be
labeled a competitive option to trade.
For example, the 615 calls are
4.55b/4.65a…the spread is 10 cents wide–
the vega is 29 cents. The vega of this call
option is greater than the spread…making
this a competitive option to trade.

12. On the flip side…
If the bid/ask spread is greater than the vega
of the option…it is not a competitive option
to trade.
Let’s look at some more examples so you can
get the hang of this.

13. Telsa (TSLA) weekly options…the bid/ask
spread for the $207.50 calls is
3.60b/3.70a…the vega of the call is $0.10.
Again, this is a competitive market. The spread
is equal to the vega of the option.

14. Facebook (FB) options…the bid/ask spread on
the $61.5 call is .82b/.84a…the vega is
$0.03…again, this another competitive weekly
option to trade.

15. Priceline (PCLN) options….the bid/ask spread on
the $1197.50 call is $12.90b/$14.10a…the
spread is $1.20 wide…however, the vega on this
call is $0.57. This is NOT a competitive weekly
option to trade.

16. Herbalife (HLF) options…the bid ask/spread on
the $64 call is $0.76b/$0.97a… the spread is
$0.21 wide…the vega on this call is $0.03. This is
NOT a competitive weekly option to trade.

17. Keep in mind that option market dynamics can
change. It’s important to constantly check if
liquidity conditions worsen or improve.
For example, at the time these snapshots were
taken… PCLN and HLF were not competitive
options to trade.
However, that doesn’t mean conditions can’t
improve at a later date.

18. By filtering weekly options in this manner,
you’re giving yourself a chance to not getting
hurt in “slippage.”
Remember, you have to overcome the
commissions and the difference between the
expected value of the option and the price that
you actually execute the order–if the bid/ask
spread is not competitive–you’ll get dinged on
the way in and out of the trade.

19. Now, you don’t want a great trade idea to be a
loser because you got “chopped up” from the
bid/ask spread.
Of course, the better you get at trading–the less
you will rely on rules…and the more you will
rely on instinct and experience.
However, if you’re not there yet…having a rule
of thumb like this… can really help you from
making unnecessary mistakes.

20. By the way, this doesn’t only apply to weekly
options…you can use it for standard options as
well.
If so, I’d like to hear your story.
Have you ever gotten into an option trade and
ended up losing because the bid/ask spread
wasn’t competitive?
I’ll be hanging out in the comments section
below.

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