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BookingAlpha Option Trading Advisory

Wednesday, September 18, 2013

October 2013 $RUT Bear Call Spread

This is the RUT trade I entered yesterday which I didn't find the time last night to blog about

Sold 4 RUT October 1120 Call @1.75
Bought 4 RUT October 1125 Call @1.25

Credit: 0.50 ($200)
Max Risk: 4.50 ($1800)
Days to expiration: 30
Probability of success: 82% (yesterday)

RUT closed yesterday (September 17, 2013) at 1066.39
The usual parameters I follow were all overbought (Stochastics 91, McClellan +182 and 72% of stocks above their 20 SMA)

If I need to adjust this position I will do it when the 1120 Call shows a 30% probability of expiring in the Money. At that point I will roll the spread up and probably out to November combining with the additional sell of some puts.

Check out Track Record for 2013

Related Articles
Weekend Portfolio Analysis (September 21, 2013)
Weekend Portfolio Analysis (September 28, 2013)
Weekend Portfolio Analysis (October 5, 2013)
October SPX Credit Put Spread adjustment plus a new RUT Credit Put Spread
Weekend Portfolio Analysis (October 12, 2013)
RUT 1120/1125 reaches successful expiration 

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  1. Does the 30% probability of expiring ITM translates into a delta of 30?

  2. Not always. But it is a decent approximation most of the time.