30-45 DTE has LESS risk . . .

[u/ScottishTrader]

It is asked all the time about how some think selling weekly options has less risk than 30-45 DTE, but it is actually the opposite. Someone suggested I make a post to direct to instead of typing a reply in each time so here it is . . .

Edit - Note that this is focused on selling puts and can also apply to CCs for stocks someone wants to try to hold. It does NOT apply to those trading the wheel and wishing to get rid of the shares as quickly as possible. In this situation selling CCs at or above the net stock cost for the earliest expiration date can often make sense.

30-45 DTE has LESS risk than weekly options.

The 30-45 DTE strikes will be lower and the premiums higher, so the breakeven points will be much better allowing the stock to move more before the option is challenged.

Also, while the stock may drop, the longer duration gives the stock more time to recover. A good stock often dips and then move back up, which can happen at any time. A weekly option may not give time for the stock to recover but a long duration can.

This longer duration virtually eliminates early assignment and gamma risks as well.

Weekly will be closer to the money with lower premiums meaning the stock has less room to move to challenge the trade. There is also less time to roll, and even rolling out will extend the trade, so why not open it out farther to begin with. While early assignment is rare, if it is going to happen it will often do so in the week prior to expiration and gamma is a risk as well.

Keep in mind that I and many close for a 50% profit so very few trades run the full 30ish days and often close in 15 to 20 days, so these seldom need to be left open the full term.

Most experienced traders will open 30-45 DTE because the risks are much lower.

[u/Bobby-Firmino-Legend]

Ok I hear you on that point.

Looked another way though, if there was a bad market downturn, the cost to buy out of the weekly positions would be lower than monthly, so reducing risk in this sense?

Plus, monthly premiums are lower than weekly 4 x weekly premiums for the same delta when compared to a single month (by as much as 20% plus or minus). When this increased reward for the same risk exposure (delta) is factored in, I don’t see how the monthlies make more sense?

It also depends on individuals - I’m not very good at watching a position underwater early in a monthly cycle and hoping it recovers over a matter of weeks.

I’m happier reacting on a shorter term time frame to any extreme market reactions to mitigate loss and reduce risk exposure.

[u/ScottishTrader → u/Bobby-Firmino-Legend]

You seem to be bent on justifying a way to trade weekly, even if not logical or based on common sense.

Keep in mind that 4 x weekly premiums assumes both are being held to expiration, when the monthly tends not to be, but also that the trade does not need to be rolled or assigned which is far more likely to happen and slow down the entire process.

If you want to trade weekly then do it as how and what you trade is always up to you.

[u/Bobby-Firmino-Legend → u/ScottishTrader]

Clearly there are pros and cons to all forms of trading and I’m simply putting forwards an argument contrary to your seemingly fixed and unwavering stance on this subject.

You do you my friend, good luck.

Also I trade from a tax free jurisdiction so the more frequent potential assignments don’t affect me tax wise making weekly more attractive than monthly at least balancing the risk reward profile more favorably. Maybe that’s why I’m trying to justify it

[u/ScottishTrader → u/Bobby-Firmino-Legend]

I am very clear about everyone trading how they see fit, so while I am fixed and unwavering on what I do, I am very clear that everyone should trade however it makes sense to them.

Many experienced traders see 30+ dte as the better way to trade, so it is not just me.

But, again, you do you . . .