Trade view /
05 January 2017 at 23:08 GMT
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.
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.
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
— Edited by Adam Courtenay
Non-independent investment research disclaimer applies. Read more