Buy 2 RUT May 1000 Put @4.60
Sell 2 RUT May 1010 Put @5.20
Credit: 0.60 ($120 for 2 contracts per leg)
Margin: 9.40 ($1880 for two contracts per leg)
Days to expiration: 49
RUT closed today at 1151. The 1010 short strike of this credit spread is over 12% below the current price. I feel that's pretty safe.
The market is close to a short term oversold extreme.Notice how I say short term. Of course the market is not oversold in respect with valuations. With more than 60% of securities trading above their 200 Day Moving Average we cannot say it is an undervalued market. But I don't care about that number (two hundred days MA). I care about what is going to happen in the next 4 to 5 weeks. In the short term, I feel we are close to a rebound when only 29% of the stocks are trading above their 20 Day Moving Average. Even if I'm wrong, I have 12% as cushion for error. I like this position.
Here's a chart of RUT at market close for future reference
(Click on image to enlarge)
With this trade, these are the positions in the portfolio:
April RUT 1080/1090/1280/1290 Iron Condor $480 credit, 83% probability of success with 21 days to expiration
May SPX 1695/1700/1960/1965 Iron Condor $320 credit, 80% probability of success with 49 days to expiration
May RUT 1000/1010 Credit Put Spread $120 credit, 94% probability of success with 49 days to expiration
I would like to open another trade in the April expiration cycle. Let's see if the market keeps falling in the next few days to add an April Credit Put spread .
Check out 2014 Track Record
Weekend Portfolio Analysis (April 5, 2014)
Weekend Portfolio Analysis (April 11, 2014)
Weekend Portfolio Analysis (April 18, 2014)
Weekend Portfolio Analysis (April 26, 2014)
Weekend Portfolio Analysis (May 3, 2014)
Weekend Portfolio Analysis (May 10, 2014