Many options traders have used weekly OEX or SPX options in speculative or income strategies. Now the Option Industry Council wants us to know that new options classes have been added to the weekly option series. According to the OIC, these include options on the SPY, QQQQ, IWM, and DIA. As of July 5, other ETFs and even some equities were added, according to the CBOE's product page, which does not list the DIA, as did the OIC's page. The new list also includes GLD, XLF, EEM, C, BAC, AAPL, BP, F, GOOG, AMZN, FAS, FAZ, and MSFT. Check the product listings on the CBOE website for a complete list. Many traders use these low-cost ETFs, and perhaps will appreciate the extra flexibility provided by weekly options.

Some traders may have already noticed the new weekly options. They began trading Friday, June 4, with the first weekly option series in these ETFs expiring on June 11. As with other options, settlement dates will vary. SPX and DJX options settle on Friday mornings, but OEX and XEO weekly options settle on Friday evening. Previously, all weekly optons were listed each Friday and expired the following Friday, but the CBOE's site alerts traders that "[b]eginning July 1, 2010, all new Weekly option series at CBOE will begin trading on Thursdays and expire the following Friday." Previously, if a weekly should be added on a Friday that is an exchange holiday, they will be added the business day that immediately precedes it. In other words, they would usually be added on the Thursday before the Friday instead. Neither the press release nor the product page clarified whether the options would now be listed on a Wednesday or a Friday if Thursday happened to be an exchange holiday, so I'm not sure what would happen in that case. Also, if the following Friday is expiration Friday, then the front-month options serve as weekly options and no new weeklies will be listed for that week.

Whatever cautions you've heard about trading weekly options--concerns about liquidity and accelerated time decay--apply to weeklies in these ETFs. On June 30, a quick check of each of my two brokerages showed that neither yet listed the weeklies for the DIA, although they did for the other three. On that same date, the IWM's then-ATM 61 strike weekly options showed volume and open interest of only 214 and 40, respectively, for the calls and 292 and 432 for the puts. The 63 strike call did show a healthy volume of 2,533 with an open interest of 547.

In contrast, the then-ATM regular JUL calls had volume of 3,712 and open interest of 3,364, while the more heavily traded 63 call had volume of 10,543 and open interest of 7,777. The then-ATM 61 regular JUL put showed a volume of 31,511 and an open interest of 81,889. Compare those numbers to the volume and open interest in the 61 strike weekly options, and I think you'll find a difference. That difference might be reflected in the ease of getting in and out of positions, especially complex positions such as butterflies, calendars and iron condors. I certainly wouldn't want to do 25 contracts of an IWM call butterfly utilizing weekly options on that week when the IWM's then-ATM weekly calls had an open interest of only 40. Would I speculate with one contract of a weekly call? Maybe. But buying 25 contracts of a call butterfly using those weekly options that particular week? No way, even if I were a trader who tended to trade weekly options.

The appeal of weekly options, of course, can be twofold. For those buying options, weekly options are of course cheaper and afford more leverage. For those selling options, theta-related (time-related) decay accelerates more quickly in a weekly option, assuming that volatility doesn't pop higher, affording the possibility of profiting more quickly.

Negatives exist, too, of course. Losses can accumulate more quickly, too. Trades are riskier and require quicker responses in the forms of adjustments. I always have to add another caveat when talking about ETFs and complex options positions that involve selling options. At least some ETFs and some equities are dividend-paying, with ex-dividend dates that seem to come out of nowhere for some of the ETFs, unlike equities. The SPY and QQQQ both last had ex-dividend dates during June's expiration week, for example. I have yet to have found a good site for telling when the next ex-dividend dates on these might be, and what the dividends will be. I've heard experienced traders talk about the apparent difficulties they've experienced in making these determinations, too, with some developing complicated methods of determining what the dividend is likely to be.

You need to know what that ex-dividend date will be before you use weekly options to set up a complex strategy in which you're selling some options, particularly calls. Why? If a call you've sold is in the money and has little extrinsic or time value left on ex-dividend day, you risk assignment. That's not usually a disaster, as you can just exercise your offsetting long call, but it will mean that you'll owe dividends, too, to someone. If you're going to trade the weeklies in these ETFs, be sure you know when they're ex-dividend day will be, and talk to your broker or trade desk about your risk of assignment if you have sold calls that are now in the money.

It may be that most ex-dividend dates for these ETFs occur during opex week. The DIA's last ex-dividend date is listed as 2/19/2010, which was also an expiration week, but the IWM's was listed as 3/24/2010, which was not an expiration week, unless I'm looking at the calendar wrong.

I know some experienced traders with short attention spans who prefer to trade employ weekly options in their complex options strategies because they're in and out of their trades quickly. Others of us prefer to be out of our option trades well before option-expiration week. A perking-along-fine complex option trade can suddenly fall apart during option expiration week when the Greeks of an option position start shifting radically due to the gamma and other effects. When you're trading weekly options, every week is option-expiration week.

For now, unless you're an experienced option trader who knows the ropes, it might be best to use weekly options only when you want to speculate, limiting yourself to lottery money that you can afford to lose. When markets jolt the way they've been doing lately, your purchase of a cheap weekly option can result in a big win or a big loss, but it's often difficult to predict which will occur. You just don't have a lot of leeway in which to recover a trade if it goes wrong.

Unless you've got some of that lottery money lying around and are a cowboy or cowgirl trader, consider letting others experiment while you watch to see if volume and open interest prove strong enough to provide the liquidity you want. Especially in markets that are as unpredictable as these, it may be difficult to get in or out of an option trade in all but the most liquid vehicles, and these new weekly options do not yet qualify for that label.