KnowHow® News
August 2010: In The Know
Also in the August '10 Issue
Ask The Expert
GTC and GTD Order Expiration

When do my Good until Canceled (GTC) and Good until Date (GTD) orders expire?

Extended Hours Option Trading

Is after-hours trading available for options?

Tips of the Trade
Bond Laddering Tool

Stagger the maturity dates of your bond portfolio with Scottrade's easy-to-use customizable bond laddering process. The Bond Laddering Tool is under the Trade tab in your account in the CDs & Bonds section. Simply mouse over the Bonds tab and then select Bond Laddering Tool from the drop-down box. Once you create a bond ladder investment using the tool's six-step process, click Buy This Ladder to purchase all the bonds you selected.

Bonds involve risks including, but not limited to interest rate risk, reinvestment risk, inflation risk, call risk, liquidity risk, credit risk, market risk, default risk, event risk and a risk of loss of principal. New issue offerings are sold by prospectus or offering circular available at www.scottrade.com. Investors should read these carefully.

Funding Your OptionsFirst Account

There are two ways to fund your OptionsFirst account: transfer funds electronically from your bank, or mail a check to Scottrade OptionsFirst.

To make an electronic (ACH) deposit, click the Transfer Funds button along the bottom of your OptionsFirst window. Make sure ACH is selected at the top, and specify the amount and the bank account you would like to use. If you do not currently have a bank account associated with your OptionsFirst account, click the Establish a New Relationship button in the bottom right corner of the Funds Transfer window and follow the instructions provided.

To mail a check to Scottrade OptionsFirst, send your payment to Scottrade OptionsFirst, P.O. Box 31542, St. Louis, MO 63131-0542. Include your account number on the check.

Read More Tips >
Weekly Equity Options Debut

The options trading community recently welcomed a new kind of options contract for a select group of stocks and exchange-traded funds (ETFs): weekly options. As their name implies, weekly equity options, or "weeklies," are a short-term option contract with a weekly expiration. This is in contrast to traditional equity options, which expire monthly. Key features of weekly equity options are:

Expiration - Weeklies expire at the close of business on the last trading day of the week, typically Friday. The weekly equity contracts are listed the Thursday of the week prior to the expiration date, and the expiration date is the last day weeklies can be traded. During weeks when traditional equity options expire (third Friday of the month), there are no additional weekly contracts issued.

Settlement - All weekly equity options are PM settled (they are based on the last day's closing price).

The short time horizon and lower cost of options near expiration allow for unique and aggressive trading strategies, which makes them more attractive to some traders. However, with shorter term contracts, time premium is vastly reduced. Changes in market forces, such as changes in stock price and days to expiration, will have a larger impact on these shorter term contracts.

As of this publication, there are 23 equity symbols listing these short-term options.

Weekly equity options were introduced on June 4, 2010, with the listing of weekly options on DIA, IWM, QQQQ and SPY. According to a NYSE news release, these short-term listings accounted for nearly 1 million contracts traded in their first week. This is great volume for a new product, but is still less than the standard monthly contracts. Lower trading volumes often lead to larger bid-ask spreads, which can be a disadvantage for traders. Look for these short-term contracts to expand to other symbols in the near future.

Weekly index options have been available since 2005 and operate similarly to weekly equity options, but with different expirations and settlement style.

Options involve risk and are not suitable for all investors. Detailed information on our policies and the risks associated with options can be found in the Scottrade OptionsFirst Options Application and Agreement, Brokerage Account Agreement, and by downloading the Characteristics and Risks of Standardized Options and Supplements (PDF) from The Options Clearing Corporation, or by requesting a copy from your local branch office. Market volatility, volume, and system availability may impact account access and trade execution. Supporting documentation for any claims will be supplied upon request.

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The information and content provided in the Scottrade® Knowledge Center is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.