Stock / Symbol: Russell 2000 / RUT
Option Strategy: [private_monthly]bear call spread[/private_monthly]
Price at trade post: $850.50
Reasoning: With 30 days till January expiration, I'm putting on a [private_monthly] bear call spread[/private_monthly] on RUT. Although the expected deviation is[private_monthly] +/- 47 points between now and January expiration, I think we're not neutral here and are much closing to being overbought than over sold. So, I'm selling the 890 calls, covering with the 900 calls, and adding an additional 905 call for protection[/private_monthly] in the event of euphoria surrounding a resolution to the fiscal cliff. The trade overall is -8.4 delta, 2.8 theta, and -10 vega. The probability of success on this trade is 85%. If RUT trades [private_monthly]up to $870, we'll either stop out of the trade or adjust it.[/private_monthly]
Trade Details:[private_monthly]
STO -3 RUT Jan13 890 calls
BTO 3 RUT Jan13 900 calls
for a min net credit of $1.20 per contract. (day order, limit order). The current mid is $1.25. If not filled today, ok to try again tomorrow.
then, once filled
BTO 1 RUT Jan13 905 call
at the market
Requirements:
Cost/Proceeds ($225.00)
Option Requirement $3,135
Total Requirements $2,800
Estimated Commission $12
[/private_monthly]
Max Risk: $2,800
Max Reward: $225 or 8%[private_monthly] between $0 and $890[/private_monthly] by Jan 18[private_monthly]
Profit Range: 0 to $890.15 by Jan 18
Suggested Upside stop: @ $870
Suggested Downside stop: NA
[/private_monthly]
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