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More on Options trader effects

Weeklys vs Monthly Puts vs Calls

    1. Weekly puts are more volatile than monthly puts.

    The put with the most volatility in the last year was the weekly SPX put expiring next Friday (the one I recommended).

    2. Monthly calls are more expensive than weekly calls.

    This is because a monthly call has to go up 50% for you to break even. A weekly call only has to go up about 10%.

    3. Why are these true?

    Because of liquidity issues. If you want to buy a weekly put, you can only do it on Friday when they expire. So if there's any sort of panic then you might not be able to sell them at all. This makes them much more risky and volatile than a monthly option which can be traded any day they are open.

    4. Why is this important?

    If you are trading options, particularly near expiration, then you have to take into account the risk and volatility of each option and price accordingly. For instance, if I am selling an option, I might not want to sell a weekly option unless I know there is real news that will move the market or unless I am getting paid extra for taking on that extra risk and volatility.

    5. How does this apply to stocks?

    It depends on what kind of stocks we're talking about. For instance, let's say you think AAPL is going up but only for a week or two before it starts going down again (this happens sometimes). In that case, it's probably better to buy an AAPL weekly call than an AAPL monthly call (assuming both have similar prices). The same would be true for puts although in general puts are less volatile than calls so this doesn't come up as often.

    6. What about crypto?

    Very similar rules apply but there's one extra factor which makes things more complicated and interesting: liquidity issues aren't solved by expiration because most cryptos don't expire (although some do). So if there's any sort of panic around buying or selling bitcoin, when would you be able to trade out of your position? This means bitcoin options have much higher risk/volatility than other assets so they should be priced higher when bought or lower when sold compared to other assets with equivalent expirations and strikes (i.e., similar moves in the underlying asset). That said...

    7. What is the "Bitcoin Put"?

    There's an index called "BTCJPY" which tracks how much JPY 1 BTC goes for in Tokyo vs USD/EUR/GBP etc.. It also has options on it so we can use our above rules about how options work relative to each other and relative to their underlying asset. There was a huge drop in BTCJPY last week so this index could be good for short-term trades over the next few weeks . Keep in mind that due to lack of liquidity many exchanges won't even offer this index as an option expiring later than July 17th so check beforehand before trading anything too long-term on this index .
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