Weeklies

Weeklies are options contracts that expire at the end of a given week, rather than following the standard monthly cycle that traditional options use. An option itself is a contract giving the buyer the right, but not the obligation, to buy or sell a stock or index at a set price before a certain date. Weeklies work exactly the same way; the only difference is how often new contracts are listed and how soon they expire.

Most exchange-listed stocks and indexes that have weekly options will list a fresh set of contracts every week, typically expiring at the end of each week, so a trader can always find something expiring soon rather than waiting for the traditional monthly date. Because the expiration is so close, weeklies decay in value quickly as expiration approaches, a process tied to what's called time value, the portion of an option's price that reflects the time remaining for the trade to work out.

The nuance that trips people up is that weeklies behave very differently from longer-dated options even though the mechanics of calls and puts are identical. A weekly option's price moves faster in both directions for a given move in the underlying stock, because there is so little time left for the bet to play out. This makes them cheaper up front but also more likely to expire worthless, and it means small shifts in timing or volatility can have an outsized effect on their value compared to a monthly option on the same stock.

It's also worth knowing that not every stock has weeklies. They tend to be listed on highly liquid, heavily traded names and major indexes, since exchanges only add them where there is enough consistent demand to justify weekly listings.