RVPCS – 05.26.2015

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Russell 2000 – Vertical Put Credit Spread

After a long weekend and the RUT opening down by ~10 points there was a possibility for an intra week entry.  I knew the volatility would be rising.  IV was approximately 2 percentage points higher.  OI showed peaks at 1230, 1220, 1210, and then 1190.  Considering that our time frame is from midday Tuesday to opening Friday morning, this trade would only be about 2.5 days.  Therefore, our two standard deviation value landed at 1204.  The max weekly drop value taken as -5.7% is very conservative considering that we don’t have a full week for this to come to fruition.  Max weekly drop is at 1168 just for consideration.  Technically the RSI is at 46, MACD above the signal line and above the zero line with the signal line below the zero line.  Donchian channels give a 1211 lower and 1261 upper channel.  The Fibonacci’s provide a retracement for 23% at 1222 and 38.2% at 1187.5.  RUT has been trading sideways since March 23rd of this year.  There are no FOMC announcements and we are short on market moving news as well.  However, it will be interesting to see what Jobless claims and GDP provides towards the end of the week.

1. Standard Deviation (2.5 days to expiration):

Price 1239
Implied Volatility 17.16%
1 σ 1221
2 σ 1204  (always chosen for RVPCS)

2. Technicals:

Donchian 1211 lower and 1261 upper channel
RSI 46
MACD above signal line and above zero with the signal line below zero
Fibonacci Retracements Retracement 23% at 1222 and 38.2% at 1187.5


*Charts from ThinkorSwim™

3. Historical Price Compare:

Time Frame:
For the past 1.5 years



4. Open Interest:

Price at 1239, peaks at 1230, 1220, and 1210 as seen below.


5. News:


*From Econoday.com

Disclaimer: The information presented does not consider your personal investment objectives and should not be taken as a recommendation. Further, it shall not be construed as an offer to sell or a solicitation to buy any security mentioned. The risk of loss in any stock, option, or futures trade can be substantial. Consider all relevant risk factors before trading.

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