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October 8, 2013

$RUT Weekly Trade


  • Strategy: Put Butterfly
  • Underlying: RUT
  • Trade: BUY +1 BUTTERFLY RUT 100 OCT 13 1080/1060/1040 PUT @3.40 LMT
  • Trade Price: $3.40 debit per spread
  • Margin: $340 per spread
  • Profit Target: 15% of margin ($50 per spread)
  • DTE: 10
Risk Profile:

Trade:

NOTEThis is an advanced trade, anyone that isn't familiar with butterfly spreads should paper trade first before committing real capital.
We're putting on a slightly bearish put butterfly in Russell 2000 Index options with about 10 days until expiry. This is a step 1 of this trade. The way we're going to manage this trade is:
  • If RUT moves to 1080 we will add another put butterfly with 1070 put as short strike and wings will be 20 points away (same as original trade). Our profit target will be 15% of new margin requirement and our timeframe to exit will be within the next 7 days. This is our Risk Profile 7 days from today:


Notice, we can be wrong on direction and as long as RUT trades between 1027 and 1083 this trade should be in the green.