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Tuesday, July 3, 2012

August RUT Credit Call Spread

Demo-trading:
SELL 3 RUT August 860 Call (@3.20)
BUY 3 RUT August 870 Call (@2.00)

Credit: $1.20 (1.20 * 100 * 3 = $360)
Margin: $8.80 (8.80 * 100 * 3 = $2640)

Break-even point(s): 861.20 (Currently at 808, RUT index would need to go up around 53 points in the next 45 days to cause a loss. That's about a 6% increase)
Probability of success: 80.75%
Days to expiration: 45
Max return on margin: 13.64%
Commissions: $9.00 (Assuming a very unfavorable $1.50 per contract)

Order execution:
(Click on image to enlarge)
 
Profit picture:
(Click on Image to enlarge)

Basically, RUT would have to make a new high for the year in order for this position to be a loser.

(Click on image to enlarge)

 I'm playing it based on how "slow" summer markets tend to be. If the markets rally hard, and RUT hits 855 I will be adjusting this position.


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Related articles:
Weekend Portfolio Analysis (07-08-2012)
Weekend Portfolio Analysis (07-23-2012)
Weekend Portfolio Analysis (07-28-2012)
Weekend Portfolio Analysis (08-05-2012)
Weekend Portfolio Analysis (08-12-2012)
Weekend Portfolio Analysis (08-18-2012) 
 
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3 comments:

  1. Since the RUT has climbed close to where an adjustment maybe necessary next week (if it continues to climb)how do you plan to adjust? I need help in understanding that because I have the same trade although I got in around 822 and it still looked pretty safe at the time.
    Thanks for your time.

    Changis

    ReplyDelete
  2. Hey Changis,
    Take into account that this trade was an August expiration trade, that was opened on July 3. Which means this position is over by now.

    ReplyDelete
  3. I think your intention was to comment on this article instead http://www.the-lazy-trader.com/2012/08/september-rut-bear-call-spread.html which is the RUT 860/865 that expires in September. I'm going to go there and leave my thoughts on a possible adjustment

    ReplyDelete