Income Trade in RUT

[Steven Place]

From the pivot low 13 days ago, the Russell 2000 index is up 8.6%.

Can it get more overbought?

Yeah, it’s possible. In fact, I think we can trade up to 1250 before this stops.

However, given how much we’ve moved, it makes sense to expect some kind of reversion, or at least sideways action.

Normally I would say butterflies are a good bet here… and to be fair, they probably are.

Yet due to liquidity of the RUT board as well as the low implied volatility (RVX is at 17.50) we can put some scaling calendars to work.

Here’s the trade:

Simple idea here. This is a slightly bearish bet that makes money if the RUT pulls back or goes sideways.

This is a scaling trade, meaning if the market continues to rip, we will add more calendars and commit more capital to the trade.

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[Steven Place]

Got really, really lucky with the rip higher after the #brexit selloff.

Taking profits here:

Sell to close RUT Jul/Aug 1170 put calendar @15.50

Return on risk: 22%

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