November Income Trade in EEM

[Steven Place]

After a very strong showing, EEM has gone a bit parabolic and should consolidate at these levels.

This trade is a mean-reverting butterfly trade. The intent is to add if EEM keeps rallying, and hold pat if the etf farts around for a while (technical term).

Buy 7 Nov 43/40/37 Put Calendars for .80 or lower

This trade profits on a non-move or a slight pullback. This is also a small initial position.

If EEM rallies to 42.50, then simply add more put butterflies– the 45/42/39 strikes would be the best idea.

 

[Steven Place]

Due to the Fed rally, we got a big move up to 43, so we are going to add another 1/3 to our position:

Buy 7 Nov 46 put
Sell -14 Nov 43 Put
Buy 7 Nov 40 Put
Debit: 1.05

What this effectively does is close out the high end of our put butterfly and rolls it to a put condor

A move up to 44.50 will trigger the 3rd addition to this trade.

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