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July 15, 2013

$RUT Weekly Trade


  • Strategy: Calendar spread
  • Underlying: RUT
  • Trade: BUY +1 CALENDAR RUT 100 (Weeklys) JUL4 13/JUL 13 1040 PUT @4.25 LMT
  • Trade Price: 4.30 debit per spread
  • Margin: $430 per spread
Trade:

Risk Profile:

We are selling 1040 PUT that expires this week (Jul monthly) and buying 1040 PUT that expires next week (Jul4). Options that expire closer in time will decay faster than those that expire further out in time, so we're taking advantage of time decay here. Our goal would be to get out by Thursday with about 15% (of margin) profit or$65, and we don't want to lose more than 20% (of margin) on this trade or $85.