How to play weekly options?

In July 2010, Weekly options was recently introduced for a number of stocks and ETFs.

How can you play weekly options? (These are some notes from the Thinkorswim Wednesday 7/14/2010 chat with Tom Sosnoff and Steve Quirk).

Weekly options allow you to make more aggressive adjustments. Theta will decay much faster, so this is good if you are playing positive theta strategies (sell spreads for a credit, calendars, butterflies, and diagonals).


Calendar Play

Can use the weekly options to trade calendars on a weekly basis. You can sell the weekly and buy the monthly. As each week expire you rollover the weekly. With calendar spread you can play it on the bullish and bearish side. This can be a poor man's version of the covered call.

Knowing this flexibility, so how will I would I trade it? I plan to use the weekly pivot points to help me determine where the stock might trade in that week. With this information I can determine the strike to play. I would play this on stocks that are not as volatile (e.g IBM, XOM,MCD, and other dow 30 stocks). Remember with the calendar you don't want the stock to move too far from your strike.

Butterfly Play

Trade butterflies. If you think a stock will end at a certain price, with a weekly option, the theta decay will be faster.

You can use weekly options to play news events or earnings where decay will work fast (either in your favor or against you). Remember that butterflies are negative vega, meaning that you want the volatility to come down.