Options trading offers a versatile way to capitalize on market movements, hedge positions, and generate income. Among the many decisions traders face, choosing between weekly and monthly options is crucial. Each has distinct advantages and drawbacks, depending on your strategy, risk tolerance, and market outlook.
In this post, we’ll break down the key differences between weekly and monthly options, analyze their pros and cons, and help you determine which might be the better fit for your trading style.
Understanding Weekly and Monthly Options
Before diving into comparisons, let’s clarify what weekly and monthly options are:
- Monthly Options: These are standard options contracts that expire on the third Friday of each month. They have been around for decades and are the most widely traded options.
- Weekly Options: Introduced more recently, these contracts expire every Friday (or other designated days, depending on the underlying asset). They provide more frequent trading opportunities compared to monthlies.
The core difference lies in their expiration timelines, which significantly impact pricing, liquidity, and strategic applications.
Key Differences Between Weekly and Monthly Options
1. Time Decay (Theta) Impact
Time decay, or theta, is the rate at which an option loses value as it approaches expiration.
- Weeklies: Experience accelerated time decay, especially in the last few days before expiration. This can be advantageous for sellers (who profit from rapid premium erosion) but risky for buyers (who need a quick, favorable price move).
- Monthlies: Decay more gradually, giving buyers more time for their thesis to play out. Sellers still benefit from theta but at a slower pace.
Takeaway: If you’re selling options (e.g., credit spreads, covered calls), weeklies can generate faster returns. If you’re buying options (e.g., long calls/puts), monthlies may offer better odds.
2. Liquidity and Bid-Ask Spreads
Liquidity varies between weeklies and monthlies:
- Monthlies: Typically have higher liquidity, tighter bid-ask spreads, and more open interest, making them easier to trade without significant slippage.
- Weeklies: Some have strong liquidity (e.g., SPY, QQQ, meme stocks), but others—especially far out-of-the-money (OTM) strikes—may suffer from wider spreads.
Takeaway: Stick to highly liquid underlyings when trading weeklies to avoid unfavorable fills.
3. Volatility and Pricing
Options pricing is influenced by implied volatility (IV):
- Weeklies: Often have higher IV due to event-driven trading (earnings, Fed meetings, economic data). This inflates premiums, benefiting sellers but increasing costs for buyers.
- Monthlies: IV tends to be more stable, making them more predictable for longer-term strategies.
Takeaway: If IV is elevated (e.g., before earnings), selling weeklies can be profitable. If IV is low, buying monthlies may offer better risk/reward.
4. Flexibility and Strategic Adjustments
- Weeklies: Allow traders to adapt quickly to market changes. If a position moves against you, adjustments can be made within days rather than weeks.
- Monthlies: Require more patience. While adjustments are possible, the longer duration means more exposure to unforeseen risks.
Takeaway: Active traders may prefer weeklies for agility, while swing traders or investors may favor monthlies for reduced turnover.
5. Probability of Profit (POP)
- Weeklies: Shorter duration means higher gamma risk—small price moves can drastically change delta, making them more unpredictable.
- Monthlies: Provide more time for mean reversion or trend continuation, improving the statistical edge for certain strategies.
Takeaway: If you rely on high-probability setups (e.g., iron condors), monthlies may offer better consistency.
Best Strategies for Weekly vs. Monthly Options
When to Trade Weeklies
- Earnings Plays – Selling premium ahead of earnings can capitalize on inflated IV, with rapid theta decay working in your favor.
- Directional Bets – If you expect a sharp move within days (e.g., Fed announcement), weeklies provide leveraged exposure.
- Credit Spreads – Selling OTM puts/calls with 7-10 DTE (days to expiration) benefits from accelerated decay.
- Gamma Scalping – Market makers and active traders use weeklies to exploit short-term volatility swings.
When to Trade Monthlies
- Long-Term Trends – If you anticipate a multi-week move (e.g., breakout or breakdown), monthlies reduce the pressure of perfect timing.
- Income Strategies – Covered calls or cash-secured puts benefit from slower decay and fewer transaction costs.
- Hedging – LEAPS (long-term options) and monthly spreads provide cost-efficient portfolio protection.
- Swing Trading – More forgiving than weeklies if the trade takes time to develop.
Risks to Consider
Weekly Options Risks
- Gamma Risk: Small price swings can lead to large P&L fluctuations near expiration.
- Higher Commissions: Frequent trading increases costs.
- Overtrading: The temptation to chase short-term setups can lead to impulsive decisions.
Monthly Options Risks
- Slower Profit Realization: Requires patience, which may not suit aggressive traders.
- Event Risk: Holding through earnings or macroeconomic events can lead to unexpected volatility.
- Lower Premiums: Since theta decay is slower, selling monthlies yields less income per trade compared to weeklies.
Which Should You Trade?
The choice between weekly and monthly options depends on:
- Your Trading Style
- Scalpers & Active Traders → Weeklies
- Swing Traders & Investors → Monthlies
- Risk Tolerance
- Higher risk/reward → Weeklies
- Smoother equity curve → Monthlies
- Market Conditions
- High volatility → Favor selling weeklies
- Low volatility → Consider buying monthlies
A balanced approach could involve combining both:
- Use weeklies for short-term opportunities (earnings, news events).
- Use monthlies for core positions (trend following, hedging).
Final Thoughts
Neither weekly nor monthly options are inherently “better”—they serve different purposes. Weeklies excel in fast-moving markets where rapid theta decay and quick adjustments are key. Monthlies provide stability, better liquidity, and more time for trades to mature.
The best approach? Match the option’s expiration to your trading horizon. If you’re unsure, start with monthlies to build experience before venturing into the faster-paced world of weeklies.
By understanding these nuances, you can optimize your options trading strategy—whether you’re aiming for quick profits or steady, long-term gains.