Feb 2020: RUT $1615- $1635 Bull Call Spread
Stock
RUT
Trade Structure
$1615 - $1635 Bull Call Spread
Trade Date
02/03/2020
Expiration Days
03/20/2020
Trade Rationale
Most of my trades in February have been post earnings plays where my traditional indicators don't apply. However, with this trade in the small cap index RUT (Russell 2000) I am back to using my regular indicators and methods. Here I am risking $1125 to make $1125. I am giving myself 45 days for this trade to work out, a little longer than my usual trades. The reason for this is that I want to give the market enough time to bounce back from the volatility caused by the corona virus scare.
Trade Selection Criteria
Overall market movement
DOW dropped a crazy 700 points due to the ongoing corona virus scare, taking down many stocks with it dragging many stocks and indexes down with it.
No Earnings or Significant News
N/A Earnings don’t apply to Indexes and ETFs
Bollinger Bands outside Keltner Channels
Bollinger bands are outside Keltner Channels and the price is touching the lower Bollinger Band
RSI Analysis
RSI bounced back after momentarily touching 30 indicating a trend reversal opportunity.
ADX Analysis
ADX is below 20 indicating the downward movement that RUT has been experiencing since 1/20 has no legs.
Trade Analysis
Since, we achieved our goal, we closed this trade for a "scratch" as part of unwinding the remaining trades. We paid $1125 for this and closed it on 2/24 for $1190
Trade Outcome
Pending
Profit/Loss
$$65
Beginning Account Balance
$16,200
Ending Account Balance
$$23,400
Hey Nishant,
Read your book very recently; you seem to have devised quite a terrific strategy.
However, am rather perplexed about this RUT trade – especially when you state its still open. If your trade rules call for exiting at a 50% loss, then your loss level on this position should have been hit quite a while back; for RUT has, like the broader market, been dropping like a rock and as of the close on 20th March was priced at just over $1000. If you’ve held the trade all the way(and I doubt you did so), it would have expired worthless.
I also have other queries after reading your book, but I guess I’ll shoot you an email for those.
Meantime, looking forward to have your feedback on this one.
Looks like I forgot to update this trade’s results. I will update today.