XRT was a trade where we had the direction right but not the timing or trade structure. We initiated the trade when we felt the ETF showed signs of waning momentum targeting a pullback to the 95 area. Here was the trade:
XRT ($97.18) Buy Sept 100 / 95 / 90 Put Fly for 1.75
As I wrote earlier in a considering our options post:
But vol is coming in a bit and this trade is currently worth 3.75 intrinsically (at 93.75) so that means there’s some wiggle room for us to be patient. But as we’ve seen, things can go south quickly and our patience on this will only last until the next turn red in the markets as we never intended this trade to be long deltas and bearish. (it’s currently long about 15 deltas).
This bounce off of the lows of earlier this week is suddenly showing signs of rolling over and we don;t want to be stuck in a long in something we intended to be a short. So we’ll take our medicine and move on:
Update: Sold to close the XRT (92.50) Sept 100 / 95 / 90 Put Fly at 1.55 for a .20 loss
(note: the Sept 100 puts are very wide and need to be traded at intrinsic value to the stock, in this case 7.50 vs 92.50)