The enormous increase in popularity of weekly expiration options has provided new Options Trading opportunities for Hedgers and Speculators alike. One particularly positive aspect of these shorter term options is the additional Strike Prices that are listed for these Trading Vehicles. The more Strike Prices the greater the opportunity to find the Options Trading Strategy that meets your risk/reward requirements. Now that the May Options Series has expired, June Options provide additional Strike Prices to meet the needs of traders. My question is why should you have to wait for the Exchange to provide you with the appropriate Strike Prices to meet your hedging or speculative requirements? Perhaps July Options should include these new Strike Prices as well.
The June monthly expiration series has 24 Days until expiration. We now have Strike Prices that in many cases are $1 wide rather than $5 from last week. This gives each trader the opportunity to establish positions in an underlying Stock or ETF for a 1% movement rather than a 5% movement. Unfortunately, the July Options Series currently do not provide that opportunity. Apple (AAPL) and Facebook (FB) are perfect examples of this. For AAPL, Strikes Prices below $100 are in 50 cent intervals for the June Expiration, for July however, the Strike Prices are $2.50 below $100 and $5 above $100. Facebook Options for June expiration have mostly $1 Strike differentials versus $5 in the July Series.
The goal of Options Trading is either speculation or hedging. In either case, limiting access to appropriate Strike Prices does a disservice to all traders. More thought should be put into providing more access to Trading Tools which would not only benefit traders interested in fine tuning their positions, but would undoubtedly increase volume on the Exchanges. As a former employee of an Exchange, I am quite clear on the importance they put on volume.
The June and July Options Series for Facebook (FB) and Apple (AAPL) are shown in the Table below (the prices are from 3:00 PM ET on Tuesday). It gives you an idea of just how limiting the July Strike Prices can be. The Table shows the Prices of the Options, the Implied Volatility, the distance the Strikes are from the current Trading Price and the percentage the Strike is from the current Trading Price. No matter what Options you are trading, the information that the Table provides is essential to deciding what the appropriate Options Trading Strategy is for you. Traders analyze charts and fundamentals, but when you are interested in Trading Options look for the information provided. Try a sample of our Options Trading Webinars; they can improve your trading technique.
Whenever you trade Options Contracts, be sure to evaluate Liquidity, Historical and Implied Volatility, the Implied Volatility Skew and the appropriate Options Trading Strategy to meet your goals. We can’t put enough emphasis on these critical elements. Just as providing the appropriate number of Strike Prices puts Traders in the position to manage risk, the factors listed in this paragraph are essential for analysis prior to establishing any Options Position. Our Webinar Preview PDF may be helpful.
Options trading involves significant risk and is not suitable for every investor. The information is obtained from sources believed to be reliable, but is in no way guaranteed. Past results are not indicative of future results.