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Tuesday, July 24, 2012

August RUT Credit Put Spread

Demo-trading:
SELL 3 RUT August 700 Put (@3.60)
BUY 3 RUT August 690 Put (@2.75)

Credit: $0.85 (0.85 * 100 * 3 = $255)
Margin: $9.15 (9.15 * 100 * 3 = $2745)

Break-even point(s): 699.15 (Currently at 766.70, RUT would need to go down over 8.5% by August expiration)
Probability of success: 91.41%
Days to expiration: 24
Max return on margin: 9.29%
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)

Looking for a smaller reward than usual taking into account that there are only 24 days left to expiration. The recent weakness in the markets doesn't seem to be over, but the RUT index is already looking oversold here and with only 26% of the stocks above their 20SMA, I'm playing my chances with this position.

RUT would have to make a new low for the year in order for this one to be a loser.

(Click on image to enlarge)

This Spread completes an Iron Condor with the existing RUT 860/870 Bear Call Spread entered on July 3. The Iron Condor looks like this:

(Click on image to enlarge)

Maximum reward $615 on a Margin of $2385. Breakeven points 697.95 and 862.05. Probability of success 87.60%.


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