Non- standard trading


🔴Non-standard timeframes. How to use? #XAU/USD (timeframe 45 Minutes) August 2020

You may notice that the weekly cycles are more present in the near-term, while the longer-term cycles are primarily monthlies. Longer-term expirations will typically consist of standard monthlies because weeklies aren't listed until a few weeks before their expiration dates. Alright, so you know what an option's expiration date is, but how do you choose which one to trade in?

non- standard trading

In the next section, we'll discuss how you can go about choosing an options expiration cycle to trade. How to Choose an Option Expiration Cycle With so many available expiration cycles, how do you decide which one to use?

non- standard trading

When choosing an expiration cycle to trade, there are two factors to consider: 1 The options strategy you plan on trading 2 The amount of trading activity in the expiration cycle you're considering gauged by volume and open interest Let's run through non- standard trading of these considerations one-by-one.

Consider Your Strategy Most of the time, options expiration cycles with less than days to expiration will be used because most options traders have short-term predictions for the stock price or implied volatility.

How Does Adjusted Options Look Like?

Additionally, traders who primarily sell options may prefer staying in near-term expiration cycles because short premium strategies profit non- standard trading time decaywhich is virtually non-existent in longer-term options. Conversely, traders who primarily buy options may also prefer shorter-term expiration cycles because short-term option premiums are less expensive and more responsive to changes in the stock price.

Then who trades long-term options? Well, a common way to utilize longer-term expiration cycles is by purchasing deep-in-the-money calls or puts to replicate long or short stock positions.

No Free Lunch in Adjusted Options

By purchasing long-term, deep-in-the-money calls or puts, traders can minimize losses from the decay of an option's extrinsic value while gaining exposure to shares of stock with a lower margin requirement more leverage. Trading activity can be gauged by option volume and open interest for a particular stock. You'll learn about volume and open interest in-depth in one of the following guides, but for now all you need to know is that more non- standard trading and open interest non- standard trading a good thing.

As mentioned previously, most traders prefer to trade short-term expiration cycles, which means the most option volume and open interest will be in the near-term cycles.

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Additionally, standard monthly expiration cycles will typically have far more volume and open interest than weekly cycles. To validate this, we compared the open interest and volume in each of AAPL's launder money through bitcoins cycles from the table in the previous section.

Here were the results: As we can see, the highest open interest values are in the standard monthly cycles. Additionally, the first two standard options expirations have significantly more open interest than any of the longer-term cycles with the exception of the day expiration.

  1. Indicator option volume and open interest

What about the amount of option volume? Let's take a look: In this case, the weekly cycle with 0 days to expiration expiring that same day had the most option volume, which makes sense because many traders adjust or close their positions on the day of expiration.

Considering only standard options expirations, we can see that the non- standard trading two monthly cycles have by far the most volume.

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  • Indicator option volume and open interest

So, what does it all mean? Well, trading the two nearest standard monthly expirations benefits traders in terms of entering and exiting positions fluidly. However, if your strategy is built for longer-term or weekly expiration cycles, then of course you'll have to use those.

non- standard trading