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Wednesday, January 2, 2013

RUT Call Credit spread adjusted

Initial trade entered on December 5, 2012 selling RUT 870/875 Credit Call spread for 0.70 credit.
Adjusted today when RUT hit 868 in the morning a few minutes after market open.

BUY TO CLOSE 5 RUT 870 Jan. 2013 CALL @12.07  (Initially sold for 3.30)
SELL TO CLOSE 5 RUT 875 Jan. 2013 CALL @9.37  (Initially bought for 2.60)

Debit 2.70
Initial credit obtained was 0.70.
So, the loss on this position was 2.00 debit. On 5 contracts per leg, that's exactly $1000.


Adjustment
SELL 5 RUT 890 Feb. 2013 CALL (@10.35)
BUY 5 RUT 895 Feb. 2013 CALL (@8.55)

Credit: $1.80 (1.80 * 100 * 5 = $900)
Margin: $3.20 (3.20 * 100 * 5 = $1600)

RUT Chart at market close on January 2, 2013 for future reference:

(Click on image to enlarge)

With a bullish candle like the one today, chances are for a continuation in the short term (rest of this week). However, with 86.61% of stocks above their 20 SMA and 80.93% above their 50 SMA, the market is very likely to trade sideways soon or digest the recent moves with a pullback (most likely next week).


Check out Track Record for 2013

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