Oct 23 – New Dec M21 Trade

The RUT is acting a bit strange. It’s stuck in a trading range while the other indices have broken out. Either the RUT catches up or leads them back down. The seasonality is strong and it’s likely we see it break out and test the 1190/1200 area where it will likely retrace. It’s struggled at the 1166 area and if we get a clear break of 1170, I see it going and testing the 1190/1200 area where it will retrace.

Based on that, on Friday, I entered a Dec m3 with 1140 strikes and setup a trade plan with the intent of converting it to a Bearish Butterfly if the market should break out and trade to 1190/1200.

The plan:

If the market reaches 1190 I will convert the M3 to a Bearish Butterfly as the Rut would have moved 120 points from trough to peak in 2 months and that is usually as high as it goes. It’s also a very significant resistance area and is likely to not break it on first touch. This would be a high probability trade. If the market retraces from this area, I will then convert it back to an M3 and finish out the trade.

If the market does not break out, I will treat the trade like a normal M3 for the duration.

2 thoughts on “Oct 23 – New Dec M21 Trade”

  1. Hi,

    Like your site. Very informative. You mention converting the M3 into a BB. By that you mean simply selling the M3-call and just keeping the Fly – and then repurchase the call after the expected correction?


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