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Wednesday, December 5, 2012

January 2013 RUT Credit Call Spread

As per my tweet at 2:20pm, today I entered my first trade for 2013, with a RUT Bear Call Credit Spread in the January 2013 expiration cycle.

SELL 5 RUT 870 Jan. 2013 CALL (@3.30)
BUY 5 RUT 875 Jan. 2013 CALL (@2.60)

Credit: $0.70 (0.70 * 100 * 5 = $350)
Margin: $4.30 (4.30 * 100 * 5 = $2150)

Break-even point: 869.30 (Around 820 when I opened the trade)
Probability of success: 79.46%
Days to expiration:44
Max return on margin: 16.28%
Commissions: $15.00 (Assuming a very unfavorable $1.50 per contract)

Below is the chart of RUT at market close for future reference.

(Click on image to enlarge)

The breakeven of this position is proximately equivalent to SPX 1481 at this moment. I might have to endure some pain with a possible year end rally, but didn't want to miss this opportunity with the market close to overbought and facing strong resistance.

Check out Track Record for 2013

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