Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Rationalizing a Trade on Russell 2000


Going long, but staying protected and always watching out.


Professor Wolfinger,

Would you consider a post/overview/narrative on specific delta, gamma, theta, and vega numbers/thoughts you personally consider while managing your RUT portfolio?

Minyan Dave

I can't comply with your specific request because different situations require different solutions. But I made a trade yesterday -- reported on Twitter:

"Locked in a gain; kept insurance, by adjusting: SOLD RUT SEP 570P that I BOT earlier and replaced them with RUT Sep 550P. +$10.30 per spread"

This is an appropriate time to discuss the rationale for the trade. If it proves useful, I'll do it whenever I have something interesting to report.

Part of my Russell 2000 (RUT) September position:

  • RUT is currently 557

  • Short: RUT Sep 530/540 Put spreads

  • Long: A few RUT Sep 570 puts as insurance

My thoughts and trade rationale:

I'm holding onto my September iron condor positions right now. I've already covered a few far-out-of-the-money (OTM) call spreads at $0.10 per spread and am not yet ready to cover any more spreads (RUT Sep 610/620 C) at current prices.

The 530/540 put spreads are not that far OTM and may soon present a problem, but overall my portfolio is well protected, there's no reason to consider making a risk-reducing adjustment, and I don't want to pay the current price (more than $2) to cover this spread.

The Sep 570 puts provide adequate protection right now. In addition, I own other puts that provide additional insurance, but that's not relevant to the trade under discussion.

One of the difficulties when buying insurance is that the trades are made at a debit -- therefore, if all positions expire worthless, the month will be profitable, but the cost of insurance reduces those profits.

< Previous
Position in RUT

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.






Featured Videos