Rationalizing a Trade on Russell 2000
Going long, but staying protected and always watching out.
Would you consider a post/overview/narrative on specific delta, gamma, theta, and vega numbers/thoughts you personally consider while managing your RUT portfolio?
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:
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.
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