Pravit Chintawongvanich from Macro Risk Advisors teamed up with RMC veteran Scott Maidel for a discussion titled SPX Weeklys:  Market Analysis and Long and Short Applications today at CBOE’s Risk Management Conference in Dana Point, CA. 

Pravit’s presentation started out discussing event pricing of Weekly options.  He actually used Euro Stoxx 50 option premium differences before and after the pending French election.  This is a very timely example of how implied volatility is often elevated for the first expiration after a known even that may result in excess market volatility.  He then discussed option selling strategies with short dated options taking advantage of end of life time decay.  He demonstrated the performance of selling weekly straddles as an effective use of short dated options. 

Scott’s part of the presentation noted that Wednesday Weeklys are just about 13 months old while Monday options have only been around since last August.  Despite being relatively new, the Monday and Wednesday options have become regular tools for hedging a specific event taking in premium with short term trades.  A great point that Scott made was that many market participants have become comfortable with options though systematic strategies such as selling index puts.  With that comfort has come the willingness to explore other option related strategies.