RVPCS – 05.29.2015

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Russell 2000 – Vertical Put Credit Spread


GDP showed a retraction in the economy this morning with a -0.7% Q/Q change. Expectations were between -1.0% and -0.2%. In this world of central bank liquidity good economic news is good for the markets, and bad economic news is good for the markets. The RUT has dipped in price this morning.  It will be interesting to see if the market sidelines for the rest of the day or makes a directional move.

When price was taken at 1241 and IV of 17.12%, two deviations gives a max strike of 1186. The historical movement (-5.7% weekly drop) gives us a number of 1170. The MACD and RSI have both risen over the week. The Donchian channel remains unchanged from our last evaluation on Tuesday. The 23% Fibonacci would have to be retested for prices to fall below 1222. There is a good amount of news for the coming week with Personal Income and Outlays, ISM Manufacturing Index, International Trade, Jobless Claims, and Employment Situation reports.

We are targeting strikes between 1160 and 1180 with the statistical, technical, historical, news, and open interest metrics providing assurance of a RUT price at or above this range between now and expiration morning on June 5th (JUN1) of next week.


1. Standard Deviation (6 days to expiration):

Price 1241
Implied Volatility 17.12%
1 σ 1214
2 σ 1187  (always chosen for RVPCS)

2. Technicals:

Donchian 1211 lower and 1261 upper channel
RSI 53.4
MACD above signal line and above zero with the signal line at zero
Fibonacci Retracements Retracement 23% at 1222 (retesting required) and 38.2% at 1187.5

RUT _ 5.29.2015 zoom

*Charts from ThinkorSwim™


3. Historical Price Compare:

Time Frame:
For the past 1.5 years

-5.7%

1170


4. Open Interest:

Price at 1241, PUT OI peaks at 1210, 1200, and 1170 as seen below.  Note that the orange highlight is reflecting the price fluctuation as calculations were being performed.

RUT _ OI _ 5.29.15


5. News:

wpid-wp-1431716261919.png

*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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