Trade Update – $IWM: Small Cap Loss

by CC December 18, 2015 11:01 am • Commentary

In mid October we entered a bearish trade in IWM, the Russell 2000 etf. Here was the original trade and rationale. We recently closed that trade for a small profit and rolled to tighter strikes, also in December. Here’s how that roll looked and the rationale behind it:

ACTION – Sold to Close IWM ($112.80) Dec 115/105 put spread at 2.80 for a .30 profit

New Trade: Bought to Open the IWM ($112.80) Dec 112/107 put spread for $1.10

Rationale – this roll reduces our risk dramatically into a week that could have a fairly binary outcome following the FOMC meeting leaving us little time to maneuver with 5 days to Dec expiration.  We are now targeting the early October low, risking $1.10 (0.80 net with roll) to possibly make up to $3.90 (4.20 net with roll):

Equities rallied into and out of the FOMC event but have now given up alot of those gains in the 2 days since. Now with IWM just above strike this 5 dollar put spread is worth just .25. We’re going to take the loss and make sure it’s not worthless by the end of the day when it expires:

ACTION – Sold to close the IWM (112.35) Dec 112/107 put spread at .25 for a .55 loss