Short term
/
Hold
Trade view / 05 January 2017 at 23:08 GMT

Income Strategy: Index calendar spread on Russell 2000 — #SaxoStrats

Product Manager, Options Trader, Educator
Denmark
Instrument: IWM:arcx
Price target: 137
Market price: 136.20
Background

We expect prices for the index to remain firm and to move largely unchanged over the next two weeks.

To establish position in the small cap index we will use the iShares Russell 2000 Index instead of the cash index as it is less capital intensive and very liquid product. 

For this "time" strategy will benefit from a narrow price range, increase in any volatility and of course time decay. 

IWM Call Calendar














Source: Dynamic Trend

Management and risk description

For this strategy we are risking our initial entry price of $0.81 per contract. As it is a long call calendar spread, the premium paid defines the maximum risk. 

As there are two weeks in between expiration, we will an opportunity to reduce the risk by rolling this calendars spread from January 20 to January 27 for additional credit.

Parameters

Underlying Price: $136.20

Status:
Opening Trade

Trade: Buy +1 Calendar IWM (Weekly) 3 FEB 17/20 JAN 17 137 CALL at $0.82

Volatility:  volatility is low and any volatility increase will positively impact our trade

Duration: We have 15 days to roll this trade and make adjustment

Breakeven points (at short expiration): $134 and $140.32

Maximum gain: max gain would occur at (short)expiration near or at the strike price 

Maximum loss: initial premium paid of $0.82

Entry: Today as a long call calendar spread using the multi-leg order ticket on the Saxo Trader

Stop: No stop 

Target:
$137 

Time horizon:
2-3 weeks

— Edited by Adam Courtenay

Non-independent investment research disclaimer applies. Read more
2y
Kurdeul Kurdeul
Georgio,
Thanks for the great idea. Which version of Saxo Trader has the Risk Graph you're using?
Both my legacy and saxttrader.com don't have it.
2y
Market Predator Market Predator
@Kurdeul: risk Graph is out of Saxo, it's independent service, pls check here: https://www.dynamictrend.com/
2y
Kurdeul Kurdeul
Thanks MP
2y
Market Predator Market Predator
You're welcome
2y
ChristianK ChristianK
Hi Georgio. The short leg of this calendar spread is about to expire. It has done well so far although the index is down to 134. What action do you recommend for the spread? Close it out or roll for another month? Thx
2y
Georgio Stoev Georgio Stoev
We will make an adjustment before Friday, Christian.

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