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July 22, 2013

$RUT Weekly Trade


Russell 2000 Index is trading around 1053. We are up over 100 handles in 6/24 bottom with little to no pullbacks. Clearly the trend is still up, but a pause or a little back and fill would be healthy here. We are going to sell options that expire this week and buy options that expire next week (same strike, same quantity). We are selling this week's 1050 Put and 1060 Call and buying next week's 1050 Put and 1060 Call. This trade benefits from increase in implied volatility and passage of time (THETA). Best case scenario is RUT trades sideways over the next few days and we'll get out at our profit target. If RUT makes a big move in either direction we will have our risk management (STOPS) working.

Trade: BUY +1 DBL DIAG RUT 100 (Weeklys) AUG1 13/JUL4 13 1060/1050/1060/1050 CALL/PUT/CALL/PUT @8.60 LMT
Margin: $860 per spread
Profit Target: $130 per spread (15% of margin)
Stop: $170 per spread (20% of margin)
Duration: 2-3 days

7/25/13 Update: 
This trade is closed for 12.79% gain in 2 days.