SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

Option Strikes and Expirations – What's Next?


Options expiration dates and strikes are among the most important parameters options traders must consider. Today we have the well-known weekly, monthly, cyclical, and LEAPS options. A lot of choices. But is that as far as we can go? The realm of possibilities could be endless. Consider some of these possible expansions:

  1. Daily options. Imagine being able to trade an option today with expiration tomorrow. This could be a day-to-day form, not just expiration Thursday. This introduces many new strategic possibilities. For example, if earnings are announced after today’s close, what could you do with a one-day option?
     
  2. Rolling options. Another possibility is rolling an expiration date forward when you need more time, or to avoid exercise. Rather than closing and replacing with the typical forward roll, this would allow you to advance expiration, for a fee, of course. Would it be worth the added cost? That depends on how much the cost would be, but this adds some intriguing possibilities.
     
  3. Adjustable strikes. Does the strike always have to be fixed? It is under the classic definition of standardized terms. But an alternative might be to exchange one strike to another (again, for a fee) to avoid lost opportunity in covered calls, for example. Being able to change the strike adds flexibility and expands the strategies to new levels.
     
  4. Higher number of strikes. So many strategies work better when strikes are only one dollar apart. The higher the underlying price, the fewer choices you find. A 5-dollar or 10-dollar range between strikes defeats many strategies, especially when underlying price falls in between strikes and at-the-money is not possible. Risks are reduced, and flexibility is added when strikes are one dollar apart. But what about 50-cent or 25-cent levels. With these expanded strikes, you could do more with many strategies than possible today.
     
  5. Options without expiration dates. Can there be such a thing as an indefinite option? Options expire; under this assumption, you cannot remove the expiration and still call it an option. A product could be created to set up contingent future trades, but it would not be an option. For example, if you would like to purchase stock at some future date and you are willing to buy the product to freeze that price (like an extended LEAPS), that would be possible without expiration.

image.png

 

Among the complexities of these ideas is the question of pricing. How would you price these alternative forms of options? Most challenging of all is # 5 above, options without expirations. The “value” of this contract would have to be substantial, because without an expiration date, time value also has no meaning.


As a product offering an alternative to stock purchase (or sale), or to options with expirations, this product would have to be valued on some basis. If the company paid dividends, it could be a calculated present value of future dividends. Or lacking dividends, current premium could be a different form of present value based on likely future growth.


It is a complex problem. But it is not altogether unlikely that the options world and the range of strategies will be expanded in the future. In 1972, only calls were available, and only on a handful of companies. A few years later, index options, options on futures, and a broad range of spreads and straddles were added. Today, we enjoy a broad range of expanded options trading systems, both highly speculative and extremely conservative. This expansion is probably going to continue as well.


As the options market continues to expand, some of these ideas will become reality. Dialogue with the industry decision makers is how changes occur. The options exchanges and associations have incentive to respond to what the market wants, so new ideas only occur if options traders make their voices heard.

Michael C. Thomsett is a widely published author with over 80 business and investing books, including the best-selling Getting Started in Options, coming out in its 10th edition later this year. He also wrote the recently released The Mathematics of Options. Thomsett is a frequent speaker at trade shows and blogs on his website at Thomsett Guide as well as on Seeking Alpha, LinkedIn, Twitter and Facebook.

 

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • 7 Ways To Avoid Forex Scams

    Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams:

    By Kim,

    • 0 comments
    • 173 views
  • Historical Performance of Selling S&P 500 OTM Calls

    If you’re comfortable owning an S&P 500 index fund, you should also be comfortable with covered calls. For example, CBOE publishes data on a simple covered call strategy with their BXMD index. The description from CBOE is as follows:

    By Jesse,

    • 0 comments
    • 170 views
  • Are Trusts the Best Way to Leave Money to Your Heirs?

    First, this is a general comment. Every person’s situation is different. I could say “95% of people don’t need this,” and you could be in the 5% who do. So, don’t ever make personal investment or estate planning decisions based on an online post, contact an actual investment advisor or attorney - most will have initial conversations for free (I do).

    By cwelsh,

    • 0 comments
    • 135 views
  • Anchor and Steady Momentum update

    As our members know, we introduced a new strategy to our members few months ago - Steady Momentum. The goal is to produce higher risk-adjusted returns than the underlying indexes. We also introduced a new version of our Anchor Trades strategy. This post will provide an update on both strategies. 

    By Kim,

    • 0 comments
    • 208 views
  • GBP/USD: If Boris Johnson Becomes PM, Volatility will Rise

    UK PM May is set to step down and Boris Johnson is the leading candidate to replace her. The erratic former foreign secretary may increase GBP/USD volatility. Despite Johnson's Brexit credentials, he could surprise and be pound-positive.

    By Kim,

    • 0 comments
    • 279 views
  • How Steady Momentum Captures Multiple Risk Premiums

    Our Steady Momentum PutWrite strategy attempts to outperform the CBOE PUT index, which writes cash secured puts on the S&P 500. An investable version of this strategy can be purchased with the ETF PUTW. The historical data for PUT extends back more than 30 years, highlighting how writing puts can be an attractive strategy.

    By Jesse,

    • 0 comments
    • 218 views
  • What Options Traders Need to Know About Dividends

    Higher dividends are better, right? Yes, usually. But not always. Dividends are a fundamental indicator and many options traders are not interested in fundamentals. But as a means for picking stocks on which to trade options, some fundamentals offer great insight.

    By Michael C. Thomsett,

    • 0 comments
    • 328 views
  • BTC/USD Struggles To Maintain Newly Conquered Territory

    The first condition to declare the market is in bullish mode has been fulfilled. Now it is Ethereum's turn to assume its part of the game. XRP/USD keeps a low profile, waiting for its chance. We begin the week of analysis celebrating the bullish behavior of Bitcoin late on Sunday.

    By Kim,

    • 0 comments
    • 306 views
  • Fear of Options Assignment

    One of the most common fears in option trading is one of early assignment.  The fear of having a large number of shares (or a large short position) coupled with a potential margin call (or Reg-T call) causing a sudden shortage of cash in their accounts worries investors.  Investors commonly view assignment as a huge potential risk.

    By cwelsh,

    • 1 comment
    • 448 views
  • The Value of Equity Asset Class Diversification

    This investing lesson is a tale of two time periods that highlight the important role of equity asset class diversification and systematic rebalancing in an equity fund portfolio.  Human nature is a failed investor, when our natural instinct is often to do the exact opposite of what we should do in practice.

    By Jesse,

    • 0 comments
    • 378 views

  Report Article

We want to hear from you!


There are no comments to display.



Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

Options Trading Blogs