I exited one of the positions when the market when down today for $0.55 (+2.09 or +79%). Later in the day the market rallied to end the day up 6.6points (+1.47%). It went up higher volumes than the previous day, but slightly less than the avg(50). The interesting point is that eventhough the RUT rallied over 1%, the spread price has remained unchanged. This is one of the advantage of selling theta versus buying theta. I bought the IWM 45P and this put lost money for the day. This is where trading smart strategies could mean the difference between profitability and loosing money.
Looking at the chart, the RUT reached its high right at the 50SMA and pulled back. This is a sign that we're still bearish, so with more days for decay to work in my favor, I should be able to exit the last RUT and even my IWM Put in the green. Once those trades are exited, I will be flat and wait for the next opportunity to enter for this month's trades.
2/1
After noticing that the RUT rallied on very low volume, I placed the bearish positions. It appears that I was right on. The gap up was also filled. Right now I'm trying to decide what to do. I'm going to exit half of the position soon and let the other run and see where it takes me.
SOLD -2 VERTICAL RUT 100 FEB 09 500/510 CALL @2.64 ISE, RUT MARK 472.25,
Similar reasons for entering the IWM put. I'm thinking that there will a pullback. There was a 9.78% increase in four sessions. We might go a bit higher tomorrow.
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