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Thursday, July 17, 2014

September 2014, RUT Credit Put spread

Today I sold the RUT 980/990 Credit Put spread using September 2014 options for a credit of 0.60 ($120 in 2 contracts for the model portfolio).
63 days to expiration.

I usually don't go that far in time. But if I were to sell August options with a 10% probability of being in the money, that would have been the 1030/1040 spread, which I consider too close to the existing Put side of the 1050/1060/1250/1260 August Iron Condor. And you know how much I hate that concentration of risk in the same area. I also thought of selling August Puts on SPX, but I'm just not comfortable doing it. The SPX index has barely gone down.

Since July 3, RUT has gone down from 1208 to 1133. Around 6.2% fall in a couple of weeks.
Since July 3, SPX has gone down from 1985 to 1958. Just a 1.3% fall.

RUT is more oversold, it has gone down further, so I'm more comfortable selling Puts there.

Today we reached a short term oversold market which triggered my decision.
This is the current situation:

McClellan oscillator : -196. This value hadn't been reached since February 3 this year
Only 24.33% of stocks are above their 20 DMA.
Stochastics (8,3,3) for RUT is at just 6.2

All the stars are aligned.

A chart of RUT after market close for future reference
(Click on image to enlarge)

After this trade, this is how the portfolio looks:

July SPX 1735/1740/2010/2015 Iron Condor $370 credit. Will expire tomorrow.
July SPX 1805/1810 Bull Put spread $150 credit. Will expire tomorrow.
August RUT 1050/1060/1260/1270 Iron Condor $300 credit.
September RUT 980/990 Bull Put spread $120 credit.

Check out 2014 Track Record

Related Article:
Weekend Portfolio Analysis (July 26, 2014)
Weekend Portfolio Analysis (August 2, 2014)
Weekend Portfolio Analysis (August 9, 2014)
Weekend Portfolio Analysis (August 15, 2014)
Weekend Portfolio Analysis (August 22, 2014)
Weekend Portfolio Analysis (August 30, 2014)
Weekend Portfolio Analysis (September 6, 2014)
Weekend Portfolio Analysis (September 13, 2014) 
Position expires yielding Max Profit (September 19, 2014)


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3 comments:

  1. I like your position. It was very well placed in my opinion.

    ReplyDelete
  2. Yeah, I think it was a good entry too. Could have been better, but you can never guess the exact bottom.
    Thanks man.
    LT

    ReplyDelete
  3. If we go down to 110 on IWM, I will sell some Sept 95/93 credit put spreads. I will also go long IWM stock. I am still waiting for SPX to hit my short-term oversold signal of 1925. I am hoping it will happen this month so I can sell some September credit put spreads.

    ReplyDelete