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I am new to option trading. I created a paper account in TD Ameritrade, and I noted some options are termed with "Weekly".

Eg "May 15, 2021 (13 days) Weekly 100" "May 22, 2021 (20 days) 100"

  1. 13 days is more than a week to expiry, so does the option have the term "Weekly"?

  2. Also what does "100" at the end stands for?

Thank you

2 Answers 2

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13 days is more than a week to expiry, so does the option have the term "Weekly"?

The standard used to be one expiration per month (3rd Friday of each month). In 2005 the CBOE piloted weekly options. They are called weeklies because instead of one expiration per month there's one expiration per week.

You'll also see some people refer to dailies, for example SPY has Monday and Wednesday expirations in addition to Friday. Those are actually considered weeklies as well, just Monday-expiring and Wednesday-expiring weeklies rather than having the standard Friday expiration. There can also be quarterlies and LEAPS (Long-term equity anticipation securities) that don't conform to the monthly standard. The availability of more frequent expirations is driven by demand.

If you look at higher dte options you'll see that weeklies aren't available as far out as monthlies. Monthlies will tend to have greater liquidity.

Also what does "100" at the end stands for?

The options contract is for the sale/purchase of 100 shares.

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  • Are you sure 100 isn't the strike? Since 100 shares per option is universal, it's not normally part of the option name.
    – nanoman
    May 1, 2021 at 19:09
  • @nanoman On TD they explicitly state it because it is not quite universal, reverse splits (unless multiple of 100) cause existing options to be adjusted to other numbers of shares. Some brokers either neglect to show you these adjusted options (limit to closing only) or only indicate the number of shares if it's not 100.
    – Hart CO
    May 1, 2021 at 19:58
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tl;dr of the other answer:

it's "weekly" because stock options expire every Friday and instances when exercise is relevant are resolved by Saturday. lots of stocks have 4 expiry each month.


monthlies

some stocks/industries only have 1 option expiration date per month. the same can be said about many ETFs and indices. it usually lies on the third Fri/Sat of the month. this is the case, for example, for $ANSS and other sparser equity options where the demand for weeklies has not been strong enough to drive people to introduce weeklies for that specific equity.


historical context:

monthly/quarterly options began by CBOE in 1973 after intense scrutiny and regulatory considerations, to ensure fairness and enforcement. that same year, Black and Scholes published their landmark paper describing options computationally.

puts were officially offered starting in 1977.

weeklies were introduced in 2005, so they're largely a new development in contemporary trading. short-period options have become increasingly popular since 2010, when CFDs were banned in the United States in the post- Financial Crisis.


what's the purpose of weeklies?

weeklies give traders leverage in short time frames, requiring low up-front premiums, in anticipation of impending news


what are the risks of weeklies?

  • there's significantly less time for long holders of short-term options to be correct about underlying price movements.

  • theta decay is most prominent the few days before expiry.

  • the majority of weekly options expire worthless

  • also, there can be liquidity problems and thus large bid-ask spreads.

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