Stock / Symbol: iShares Russell 2000 Index / IWM
Option Strategy: [private_monthly]bull put spread[/private_monthly]
Price at trade post: $76.90
Reasoning: Between now and Decmber expiration, the standard deviation calculation for IWM puts it in a trading range between [private_monthly]72.5 to 82. Like I did with DIA, I'm going to start out with a bull put spread here. On a pop up in the market, I'll add a bear call spread, making it an iron condor[/private_monthly]. This trade has a delta of 48, a positive theta of 3.40 and a negative vega of -12.35. The probability of success on this trade is 79%. If IWM trades [private_monthly]down to $73.5, we'll either stop out of the trade or adjust the position.[/private_monthly].
Trade Details:[private_monthly]
STO -5 IWM Dec12 72 puts
BTO 5 IWM Dec12 69 puts
for a min net credit of $0.34 per contract (day order, limit order). Try to get filled closer to the mid, currently at 0.36. If not filled today, ok to try again tomorrow.
Requirements:
Cost/Proceeds ($170)
Total Requirements $1330
Estimated Commission $15
[/private_monthly]
Max Risk: $1330
Max Reward: $170 or 12.8% [private_monthly]at $72+ by Dec 21
Profit Range: $71.70 + by Dec 21
Suggested Downside stop: @ $73.5
[/private_monthly]
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