For instance, the fundamental forces that cause currency valuations to change also cause equity valuations to change.

In other words, certain currencies and stocks are firmly linked… and there is no place to hide.

So this week, I’d like to examine some key intermarket relationships and the complex forces affecting them. I believe they pinpoint emerging trading opportunities.

First, let’s consider the Australian dollar…

Australia’s vast supply of raw materials means its currency’s value is linked to commodity market conditions. Strong growth in the global economy — or at least in a powerhouse like China — translates into higher demand for Australian resources.

But it isn’t easy for average traders to track and analyze everyday global conditions. There are just too many variables for a proper assessment. Luckily, there is a short cut.

Freeport-McMoRan Copper & Gold (NYSE:FCX) is “the world’s largest publicly traded copper company.” This year it is projecting to sell 3.8 billion pounds of copper and 1.6 million ounces of gold.

Therefore, as you can imagine, its share price can be considered a good proxy for global resource conditions. And also not too surprisingly, it has a very close correlation with the AUDUSD — the closest of any equity-currency pair.

The correlation percentage was approximately 20% in September, but now sits at 80%.

So if you’re trading the AUDUSD, watching FCX is a must. What does the chart tell us?

I believe the Aussie is now hesitating as to direction. If it moves within 2% of the recent highs of 107.63 or 2% above the recent lows of 1.015, it will become a very good binary trading target.

Let’s take a look at another example…

An enduring narrative of this year has been the strengthening yen, something the Bank of Japan has tried in vain to stall. Its interventions have merely had a temporary weakening effect, only to be rejected by the market.

In the coming year, whether the yen will weaken or strengthen will be a major theme for traders. An easy way to evaluate those prospects is to pay close attention to the share price of Sony Corp. (NYSE:SNE).

Looking at the chart, we can see that a stronger yen had a chilling effect on the valuation of Sony, reaching $19.

While we can’t tell which one is leading or following, a bullish change in Sony’s price action may be a signal of a weakening yen. If Sony starts reversing, the USDJPY will likely weaken. Sony at 19 will be correlated with the USDJPY at 80. I will be watching this relationship closely, so should you…

In general, looking at the key equity partner of a currency pair or an index provides important clues to future direction. There is more than what is seen at the surface. Always, ask yourself, are the co-movement patterns changing? Is divergence occurring?

Abe Cofnas
for The Penny Sleuth

Currency In Focus: Trading Opportunities on the Horizon was originally featured in the Penny Sleuth.

But first, it’s important to understand exactly what we’re dealing with when it comes to binary options.

Profiting From the Knows, the Unknowns and the Known Unknowns

To borrow a page from former Defense Secretary Donald Rumsfeld, traders must consider several degrees of truths. There are:

(1) Things we know about the markets
(2) Things we know we don’t know about the markets
(3) And things we don’t know we don’t know about the markets.

Let’s apply them to binary option trading.

What We Know: We know that the markets are headline-driven. Each headline about the U.S. road to non-recovery, the debt crises, Eurozone instability, global slowdown, Chinese growth projections, etc., all provide triggers that move the markets.

We know that these events trigger a cycle of emotions — fear, relief, euphoria, regret — and initiate crowd behavior. We also know that the crowd is wrong many times about market direction, especially at the beginning of the week.

What We Don’t Know: While we know markets will move, we don’t know for sure how far it will move in a given week… or sometimes even in what direction. We try to get an edge by using fundamental and technical tools and knowledge.

What We Don’t Know We Don’t Know: Obviously we can’t predict sudden surprise events… but neither can investors. This shows a fatal flaw in the theory that characterizes the market as being efficient. If it were, surprises would not occur.

But the fact that surprises can occur gives us an advantage.

How to Profit From Market Chaos

Most investors and traders have trouble dealing with these knowns and unknowns. One bit of news sends them running for cover while any optimistic news causes them to jump back into the market with both feet.

Thanks to binary options, you don’t have to take part in that fear and greed cycle. Instead, our knowledge of those forces sets us up for unique trading opportunities.

There are several strategies for using binary options to your best advantage, but I consider three to be absolutely key.

Protective Trades: Binary options can protect you from market sell-offs, such as a breakdown in S&P 500 or in the price of gold. Choosing binaries with strike prices 2% or so below the underlying future’s price often cost about $20-$30 and pay off $100. They don’t always work out… but when they do, they can offset losses in your stock/precious metals, etc., portfolio.

Anticipating Direction (The Greed Trade): You decide which way a price will go, then pick a binary option with a strike price that matches your belief. If the price goes through your target, your binary pays off.

The payoff here can be quite large — easily double digits and sometimes triple digits in just days. These trades involve a modicum of greed, because we are willing to take on the risk for the reward. The less you pay, the higher your risk, since a low price is a sign that the market does not believe the binary will be profitable.

That’s why we play deep-out-of-the-money binaries that cost about $20-$25 per contract. It’s a relatively low cost balanced with a better chance of returning $100. The results can be astounding, making these plays an exciting part of our binary option toolbox.

Anticipating Breakout (The Fear Trade): These plays anticipate volatility — something most investors fear most. Each week, volatility is almost a certainty as headlines shift sentiment. And the breakout trade strategy is the most consist way to profit from the up-and-down news cycle.

I predict a lot more fear in the markets — and hence many more opportunities for fear-based breakouts.

If you missed my original tutorial on binary options, simply click here. And, if you haven’t already, I suggest you check out the Nadex website here.

You can try the Nadex demo account. It’s an easy and risk-free way to get a real-world feel for binary options… and if you do, I would love to hear how you did. Feel free to shoot an email to editor@pennysleuth.com.

Sincerely,

Abe Cofnas
for The Penny Sleuth

Collect Weekly Profits From Market Chaos… was originally featured in the Penny Sleuth.

As you know, last Monday morning saw cautious optimism pushing Germany’s DAX index higher. Then Tuesday, it reversed direction when German Finance Minister Wolfgang Schäuble said the upcoming European summit might not fully resolve the crisis. But by late Tuesday, sentiment changed again when The Guardian reported that France and Germany had agreed to make over $2 trillion euros available to bail out banks.

For chartists who swear by technical analysis of price patterns, these kinds of swings have shattered the notion that price action reflects some kind of rationality of expectations. And while the longer-term view of fundamental analysts has predicted these breakdowns, they have been unable to provide a reliable timeline.

Of course, traders need actionable knowledge. That’s why I have worked hard to develop a new type of analysis to anticipate these swings. I call it sentiment analysis — more reliable than reading technicals, and more precise than following the fundamentals.

The fact is, as we’ve seen on a weekly basis, we can learn a lot from the never-ending herding behavior of the crowd. In many ways it’s a kind of biomimicry.

Traders, like birds, follow each other and form collective bullish or bearish flocks, where no one wants to be exposed to the market predators. But just like a flock of birds, amid the “safety” of the group, crowd-mind takes over. Waves of optimism and pessimism cause the crowd to react on instinct, selling or buying for little reason other than that the others are doing the same thing. Massive price swings are the result.

Sudden moves like those are practically immune to pure technical or fundamental analysis.

That doesn’t mean they’re always a surprise, though.

Using one of my favorite sentiment analysis tools — word clouds — can help make some sense of the moves by providing further insights into the underlying character of problem.

As you may remember, a word cloud is a visible representation of word frequency in a speech or document. The more time a word is used, the bigger it appears in the cloud.

Let’s compare and contrast two speeches, one by Evangelos Venizelos, Deputy Prime Minister and Minister for Finance of Greece, and one from September by German Finance Minister Schäuble (whose words of doubt sent the DAX reeling last Monday).

What is striking to me in the word cloud of Venizelos’ speech is the globalization of the Greek problem. Take a look:

Other than the expected key words such as “debt” and “economy,” the words “international,” “Eurozone” and “global” have important emphasis. Also notice that the word “crisis” is very small. And we don’t see too many prominent verbs referring to reducing or solving the problem.

Looking at the cloud brings to mind an old adage: “When you owe the bank a small amount of money, it’s your problem. When you owe the bank a great deal of money, it’s the bank’s problem.”

As the cloud reveals, Greek debt is indeed a Eurozone problem.

In contrast, the world cloud of Schäuble speech features a key word strikingly absent from the Greek cloud. See if you can spot it:

It’s there on the left-hand side — the word “must.” This distinction between the Greek and German perspectives reflects perfectly the traditional German preference for discipline. Yes, to the Germans, the Greek problem must be solved. The question is whether it can be solved by political leadership or by the market.

By the end of this summit, the new word that we may become familiar with is “Merkozy” — a portmanteau of German Chancellor Angela Merkel and French President Nicolas Sarkozy’s names as they attempt to work as one mind to avoid a political and economic catastrophe.

Without a breakthrough, the further risk of a global contagion is very large.

The coming days are critical. It is exasperating to the traders and those who watch and analyze the markets using outmoded methods. But it creates the kind of turbulence that we welcome as binary option traders.

There is uncertainty in the outcome, but there is certainty that the path to a resolution won’t be linear or predictable. Understanding that there will be sudden shifts is the key to binary profits!

Sincerely,

Abe Cofnas
Currency Analyst for The Penny Sleuth

Word Clouds of the Gathering Debt Storm was originally featured in the Penny Sleuth.

Surge-and-sell market turbulence can be translated into a quantifiable property known as volatility. Once we “map” volatility, we can trade it more effectively. The trick is that there are a lot of ways to measure volatility.

I won’t bore you with all the technical aspects of it. But I do want to clear up a common misconception. Some people believe that the opposite of volatility is no movement at all. That is not true. Consider the human heartbeat. If it’s steady at 65 beats a second, then the volatility is zero. That doesn’t mean it’s standing still!

No, volatility is when the rate of change in movements becomes extreme.

For a look at what that means for technical charting, check out the chart below. It shows the co-movements of the AUDUSD’s one-month volatility against the AUDUSD spot.

They are in tandem, with peaks and troughs in volatility pointing to reversals of the price direction. So when a volatility spike shows up, it’s a good time to bet on the underlying investment going the other way.

For a more focused reading of volatility, we can use volatility smiles.

Volatility smiles are a type of charting that provides a shape for investor fear and greed. It represents the volatility of options at different distances from the spot price. If market volatility were neutral, charting the volatility values for puts and calls would form a shape like a smile.

In reality, however, volatility smiles are few and far between. Most of the time, sentiment favors one side or the other. When one side is being favored, instead of a smile in the volatility curve, there’s a skew or smirk.

Lately most option market are NOT smiling.

For instance, last week a chart for crude oil showed a big skew on the put side. Premium prices for puts were more expensive than calls at the same distance from the at-the-money spot price. It was a clear signal of very bearish conditions. Volatility levels for options were in the 50% range. It wasn’t parabolic, but it was sufficient to warn that it was time to look at the calls side of oil.

Last week the three-month volatility surface shows a change.

Notice the shape has begun to curve up on the call side. It is no longer purely bearish. Traders are beginning to shift their sentiment away from extreme bearishness on oil. This tells us to not be afraid to look for buying opportunities in oil.

Now take a look at the USDJPY volatility smile.

The volatility of the calls is balanced by the volatility of the puts — nearly a perfect smile. For the same distance from the spot, the volatility of oil is five times the volatility of the USDJPY. This clearly provides evidence that investors have ambivalent sentiment on the direction of the USDJPY.

If you’re still not convinced about using volatility smiles as a measure of market sentiment, look at the volatility smile of the Chinese Renminbi.

Does the market sentiment expect it to strengthen or weaken? There is a clear and very steep skew to the call side. But the put side is also coming alive. Take notice — this may mean that bets on a stronger Renminbi in the near future are not that certain!

The trading action implications in following volatility smiles are clear. They are signatures of the war between bullish and bearish sentiment. When there is a skew to one side, it’s not a predictor of a reversal — but it is a warning of a potential reversal. When the volatility surface moves away from a smile, the conditions are ripe for betting the other way.

Ultimately, the market tries not to be skewed in one direction for too long. You can and should bet on that.

Sincerely,

Abe Cofnas
Currency Analyst for The Penny Sleuth

Measure and Invest in Market Fear With a Smile was originally featured in the Penny Sleuth.

The answer is, more often than you think.

And today I’d like to share my in-depth research that proves it. The charts below show you the number of weeks that a commodity or index has moved a percent or more over the year.

This lets us see which markets have a tendency to make the biggest moves. And that information can help guide us to winning binary plays.

Today let’s take a look at how often big weekly swings occur in some of our favorite markets, along with some general thoughts on how to use this information.

S&P 500

Between Aug. 6, 2010 and Aug. 26, 2011, the S&P 500 has seen a weekly move of 1% in either direction a total of 17 times. It moved 2% in either direction nine times. It moved 3% in either direction four times. And the biggest moves, jumping or losing 4-5% in a week, occurred just four times in total.

That means we can generally expect 1% moves to happen frequently, which favors at-the-money binary options. On the other hand, it also shows that bigger swings aren’t out of the questions, which can make deep-out-of-the-money binaries smart bets.

Gold

The weekly closes support the sentiment that gold can move big in either direction. From Aug. 6, 2010, to Aug. 26, 2011, gold had 11 weeks where it closed up more than 1%; 12 weeks where it closed up more than 2%; six weeks where it closed 7%; one week where it had a close of 4%; and two weeks it had a close of 5%.

So in general, you’d be better off buying deep-out-of-the-money binaries than selling near- or out-of-the-money gold binaries.

WTI Oil

West Texas crude oil is one of the most interesting in this bunch. It really shows a capability for big moves. There were nine weeks where it closed 1% in either direction; nine weeks where it closed 2% or more; 10 weeks where it closed 3% or more; three weeks of 4% moves; and an extraordinary 11 weeks where it closed 5% or more

That is movement! And it proves that crude oil binaries can have some of the most surprising outcomes of all!

Perfect Conditions for Trading Binary Options

The implications behind this data are huge. It shows we have market conditions where we can “expect” big moves during the business week. The Monday through Friday life of binary options fit perfectly with these market conditions.

A 2% move in these markets during any week, in either direction, with the right binary option strike price, can translate into gains of over 100% returns again and again.

If you haven’t already, I urge you to try a Nadex demo account. It’s an easy and risk-free way to get a real-world feel for binary options.

Just go to www.Nadex.com. It only takes a few minutes to get started.

Sincerely,

Abe Cofnas
Currency Analyst for The Penny Sleuth

Currency in Focus: Big Market Swings That Could Lead to Giant Binary Wins was originally featured in the Penny Sleuth.

Character certainly counts.

But I’m not going to talk about the character of any person.

My topic is the importance of the character of price movement in forecasting direction… and how you can use this information to strive for fun and profit.

There is so much noise out there being blared, spouted, and touted in the financial media. The market is down one day on fear and up the next on hope.

How do you make sense of it all?

I strive to block out all that noise and listen to what the market is saying. I believe all the best information is reflected in the movement of market price. Determining the character of that movement is vital to gaining an advantage in your market intelligence.

The name of my research firm is Sarnoff’s Samurai Strategies, Inc. I always get a laugh when restaurant equipment catalogs appear in my mailbox, because I don’t operate a Sushi Bar. My specialty is successfully applying ancient Japanese charting techniques to today’s markets. I’ve been lending that service to bolster the Superleverage power of the Options Hotline since 1995, taking the helm as sole editor in 1999.

How is it that I can use techniques developed for the rice market in mid-18th century Japan to help my subscribers stay a step ahead of the crowd in today’s world of high technology, high frequency, trading?

The answer lies in the fact that all the key information available today was available then: price, volume, and open interest.

When you get a report on the market, you’ll hear the price compared to yesterday’s close. But the Japanese are more concerned with where we are compared to today’s opening price than where we are compared to yesterday’s close. Back in the 1980s, when I first started studying the Japanese methods, it struck me that their technique was simply a superior way of looking at price movement. Japanese candlestick charts provide much more timely and valuable information than typical western bar charts.

My Japanese method focuses on the character (positive, negative, or indecisive) of each day’s trading. This helps reveal the human behavior (buying and selling) that drives price direction. I use the character of the behavior of market price movement to:

• Identify key levels of support (demand) and resistance (supply).
• To determine who is stronger (bulls or bears).
• When that balance of power is likely to shift.

I view each day’s trading as a struggle between buyers and sellers. The intraday action is akin to the second quarter score in an NBA basketball game… but the close, that’s like the final 2-minutes. The closing price determines the winning side on that day.

The news may report that the market is down 30-points and you would consider that negative. But, if the market opened on its low, down 150-points, and came back to close on its high, only down 30, I would view that as a positive session and be looking for higher prices to come.

A closing price above the opening is positive and means buyers were stronger on the day. A close below the opening tells me sellers were stronger in that session. When I see consecutive days of positive character, it tells me buyers have the edge. Consecutive session with a negative character can point to lower prices down the road.

If the market runs up, runs down, and closes back where it started that reflects indecision. This can often stand as the signpost of a turn. Sometimes, such action can catapult prices in their current direction.

I like to say that technical analysis is as much art as it is science. Over the years, I’ve developed something my father had… judgment based on experience.

The Japanese have a saying that a chart is like a cat’s whiskers. I use my charts the way a cat uses its whiskers: as antennae to sense and track the movement of a mouse.

We don’t catch the mouse every time. False signals do occur… they provide valuable information, and lessons, as well.

But if you don’t use the chart, you are like a cat without its whiskers.

Sincerely,

Steve Sarnoff
Penny Sleuth

Options Rundown: How You Can Unlock Unlimited Wealth… was originally featured in the Penny Sleuth.

The rally back to 11,400 in the Dow and 1198 in the S&P brought stocks full circle back to pre Standard and Poor’s downgrade levels.

But, the road to get there was treacherous and emotionally upsetting… especially for short-term traders.

I feel the best approach to this market has a couple of main keys to success:

• Buy limited risk high probability option plays that have enough time to be right.

• Manage the position by watching the weekly price charts for new relative highs and lows. Make exit decisions based on trend evaluation.

One key to my evaluation of the markets is by using the most appropriate data set.

In this case I’m talking about weekly analysis.

By using weekly analysis we can diminish outlier events. This in turn helps to evaluate trends. The goal is to look at investments using a marathon view game plan unlike the short-term focus of the 100-yard dash.

A quick scan of thirty commodity markets – the ones that have enough liquidity for option strategy execution – identifies the overall trend. Up, down or sideways are the only possibilities. When looking for new opportunities either a pullback or breakout on the weekly price charts can trigger a trade decision for entry or exit.

Overall, respecting long-term established trends has treated my Resource Trader Alert members very well over the years.

Let me show you what I mean…

Here’s an example that compares daily action in gold versus the three-month data, take a look:

With such a short-term snapshot the above chart doesn’t give us much help in determining a profitable trend.

Now, notice the consistent new highs each week to support the overall uptrend. That’s the power of keeping your eye on the broad picture through weekly data.

So… what now?

Volatility may very well continue. Indeed, it may be technology and information driven – there’s a lot to be said about the psychological difficulties processing the newfound abundance of financial data.

But it is important to keep an eye on the weekly trend.

The extreme lows last week put stock indexes at 20% off the recent highs. The recent buying recovery has placed prices a reasonable 12% from the peak. One week does not change the trend, not yet anyway.

This market action isn’t so crazy after all. Keep your eyes on the major trends – this philosophy has treated my elite readers well so far and looks to continue.

Sincerely,

Alan Knuckman
Penny Sleuth

Collect Consistent Gains in Any Market was originally featured in the Penny Sleuth.

And reflecting like this proves that chaotic markets are not as random as they appear…

That’s because, ultimately, price action can’t hide for long from the powerful capital flows of the world economy. When things slow down, we can perceive some underlying patterns through the sentiment stream and identify the otherwise hard-to-detect triggers.

But you need to know what to look for…

Let’s look at some of the important patterns that have emerged, starting with the euro.

Technically, the EURUSD pair has formed a sideways channel, zigzagging in a range between 1.4150 and 1.4400.

This pattern demonstrates a lack of any consensus on where the EURUSD is going – which poses a challenge for finding winning trades. We can make money betting with the crowd or betting against the crowd.

But when there is no crowd – stay away!

Instead, these two pairs show more favorable set ups.

The case is different with the U.S. dollar/Swiss franc pair, the USDCHF. It has a very strong sentiment consensus. Since Aug. 9, the dollar – a favorite target of bears – has jumped 500 pips against the Swiss – a favorite safe-haven basket for bulls.

Currently trading around .7706, the.78 resistance barrier is in sight, providing a powerful magnet of attraction.

Furthermore, there is chatter about the Swiss National Bank moving to weaken the currency. A play on the USDCHF pair could be one to take a look at this week.

One more to keep an eye on?

Last week has revealed yet another failure of Japanese currency intervention. The Bank of Japan must be quite embarrassed. Its intervention efforts on Aug. 3 have been totally rejected.

In fact, its deja-vu time for the yen, with the USDJPY pair probing the key 76.36 lows of the March earthquake.

The political economy of Japan cannot tolerate the yen being this strong. Now there is talk of even more intervention. As one analyst told Reuters, “Not acting and allowing the yen to renew a record high is not an option for the government.”

In all, you can see there is a lot of realignment going on. And binary options will provide us opportunities for high returns with limited risk!

If you missed my original tutorial on binary options, simply click here. And, if you haven’t already, I suggest you check out the Nadex website here.

You can try the Nadex demo account. It’s an easy and risk-free way to get a real-world feel for binary options… and if you do, I would love to hear how you did. Feel free to shoot an email to editor@pennysleuth.com.

Sincerely,

Abe Cofnas
Currency Analyst for the Penny Sleuth

Currency in Focus: Seeking Profit Opportunities Ahead was originally featured in the Penny Sleuth.

And that got me thinking about other ways to use binaries. Specifically for portfolio protection.

I spent a week at the Agora Financial Investment Symposium in Vancouver. It was a great opportunity to hear my colleagues’ thoughts on the economy and learn what readers think about binary options. (If you missed my binary options tutorial, click here.)

A key message of the conference, driven home in Agora founder Bill Bonner’s closing address, was that U.S. economic conditions are “going to the cellar.”

Today it looks like investors are getting the message. That makes it more important than ever to diversify and protect your portfolio.

And binary options can be an important part of that strategy. I’m not talking about their ability to add speculative gains to your bottom line. Instead, I mean using them as a form of protection and insurance.

When you use binary options as a protection tool, the goal is to insure your portfolio against a big financial move down. To do that, you can use our old friend, the deep-out-of-the-money (DOOM) binary.

For example, let’s say you have large exposure to U.S. equities…

Historically, gold is one of the most reliable hedges against large drops in equities.  As stock indices fall, gold tends to go up. And gold binaries offer a quick and affordable way to capture gold’s hedging abilities.

See, most Monday mornings you can buy a deep-out-of-the-money gold option for around $20. That $20 buys you $80 of profit potential— and a 100-lot position offers a potential $8,000 net gain against a $2,000 cost.

So if you have a $100,000 stock portfolio, in theory, the binary position offers protection for an 8% drop in stock prices over the week. As stock prices plummet, you can expect gold to go up, pushing your binary into the money.

It essentially acts an insurance rebate that pays you when there is financial storm damage.

Keep in mind, this kind of play is not designed to always work. It’s strictly there for protection. And adjusting the position size can increase or lower your costs while maintaining an insurance effect.

If you’re still on the fence about trading binaries, I urge you to try a Nadex demo account. It’s an easy and risk-free way to get a real-world feel for binary options.

Just go to www.Nadex.com. It only takes a few minutes to get started, and the staff at Nadex is very helpful as well.

Sincerely,

Abe Cofnas
Currency Analyst for the Penny Sleuth

Currency in Focus: Using Binaries to Protect Your Portfolio was originally featured in the Penny Sleuth.

What exactly does this mean?

Some will tell you to spread your investments over different industries and markets.  This is good advice.

Others will tell you to have a portfolio that holds both large and small-cap stocks. Also good advice.

And then there are those who will tell you to have both long and short-term strategies within your portfolio…

None of these ideas are wrong. It is all good advice. And, with a little time and research, you can certainly follow all three.

Today I want to talk to you about a new short-term strategy. A way you can collect profits weekly on swings in the market.

Last week, Steve Sarnoff joined us to talk about how you can profit with options using Superleverage. As you may remember, Superleverage allows you to profit on a stocks price movement.  Options are the key tool. You can collect profits whether the price of a stock goes up or down.

But most options you buy are for months out. If you buy an option today, you may not see profits until August. And—in order to profit, you have to analyze and decide what that market is going to do over the next few months.

What if you could shorten that time frame? What if you could still use Superleverage to profit… but you only had to decide what you thought a certain stock was going to do over the next week?

Just within the last few years, the Chicago Board Options Exchange (CBOE) started testing a new way of investing that allows you to do just that.

Weekly options, or weeklys, are a brand new way to profit from the ups and downs of the market. They behave just like monthly options, except they only last for a week. This allows you to focus on short-term price movements.

Just like with options, with weeklys you buy puts or calls. You would buy a put if you think the stock is going to go down.  You can purchase a call if you think the stock is going to go up.

Unlike monthly options though, you only have a week. New weeklys are listed every week on Thursday.  They expire the following Friday. Please note that weekly’s will not expire the same day as monthly options (the third Friday of the month). So weeklys will not be listed for that week.

Also unlike monthly options, weeklys aren’t as widely used. Because of this, weeklys aren’t listed on every stock. But more and more are added every week.

Weeklys are listed for many underlying financial securities. They allow you to bet on the price movements of market indexes, ETFs, and some stocks.  (You can find a list of available weeklys right here.)

Because weeklys last only one week, you have the opportunity to profit from very short-term price movements from something in the news, a earnings release, or a sudden price movement.

These short-term plays not only allow you to focus on short-term movements… but they are also generally cheaper than a regular monthly option.

Although interest in weeklys has grown since 2009, it is still a very new investment tool. I would check with you broker to see if they allow trading weeklys. (Some discount brokers, like TD Ameritrade and Interactive brokers, do.)

Granted, every type of investment carries risk. Weekly options are no different. And I would never recommend jumping into this arena without doing a little more research. The Chicago Board Options Exchange has a great tutorial on weeklys right here.

Sincerely,

Jessica Comitto
Associate Editor, Penny Sleuth

Why Wait? How You Can Collect “Weekly” Profits… was originally featured in the Penny Sleuth.