RUT Look Back Trade

RUT 6/10/2016

On 6/10 the market had made a pretty good move down after an uptrend. I still believed that the market was in an uptrend and wanted to take advantage of the pull back to ‘leg’ into an Iron Condor. Legging in means that you place one side of the trade without initially placing the other side of the trade. It is not uncommon for me to enter a condor this way.

On 6/10 I placed an order to sell 10 contracts of the AUG16 $1020 Put and purchase the AUG16 $1000 Put to cover them with the RUT trading at $1162.91. I was able to bring in a credit of $1.50 per contract or $1,469.54 after commissions. My initial profit was my credit of $1,469.54 and my risk was $18,530.46 which would go down if I was able to sell a Call position later. Because $18,530.46 is my maximum risk during the trade that is the one I use to calculate my return.

On 6/20 I was able to get a $1.50 credit by selling the AUG16 $1250 Call and purchasing the AUG16 $1270 Call to cover it while the RUT was trading at $1167. This brought in another $1.50 per contract raising my potential profit to $2,939.08 after commissions. If I held to expiration I would have a 15.86%, although I had no intention of doing that. After my Calls filled I placed a GTC order to close at a debit of $1.45

On 6/27 after the Britain EURO exit vote the RUT had dropped to $1096 getting close to a point when I would have to adjust the trade. I felt confident that market would rebound since nothing had fundamentally changed just because of the vote to exit. The market was panicking for no real reason. Fortunately, I was correct, on 6/29 the market was spiking up for the third straight day.

The market moved up to a range bound area after that. On 8/2 about three weeks before expiration my GTC order for $1.45 hit. After I bought back the position I was left with a profit of $1,428.13 after commissions. My return on risk was 7.71% for 53 days. Annualized that was about a 53.08% return.

Date

Sym

Act

Exp.

Strike

$

Cont

Type

Cost

Balance

06/10/16

RUT

BTO

AUG16

1000

-$6.80

10

Put

-$6,815.23

-$6,815.23

06/10/16

RUT

STO

AUG16

1020

$8.30

10

Put

$8,284.77

$1,469.54

06/20/16

RUT

BTO

AUG16

1270

$1.50

10

Call

-$1,515.23

-$45.69

06/20/16

RUT

STO

AUG16

1250

$3.00

10

Call

$2,984.77

$2,939.08

08/02/16

RUT

BTC

AUG16

1250

-$1.85

10

Call

-$1,865.23

$1,073.85

08/02/16

RUT

STC

AUG16

1270

$0.60

10

Call

$584.75

$1,658.60

08/02/16

RUT

BTC

AUG16

1020

-$0.35

10

Put

-$365.23

$1,293.37

08/02/16

RUT

STC

AUG16

1000

$0.15

10

Put

$134.76

$1,428.13

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