Trade view /
27 April 2017 at 10:12 GMT
The small caps are lagging in performance (5% year-to-date vs. 6.25% on the S&P500) behind their multinational brethren but don't discount them yet. Smaller companies with capitalization of $2-10 billion, are often considered as the growth engine in the US economy as they are fairly young with great growth potential. A potential corporate tax cut from 35% to 15% could grease up the growth further as it would leave them with more capital in their hands.
On the technical front, price is above its 30-day moving average and closed last night just a hair's breadth above its March 1 resistance of $140.86. Shares closed at $140.99 after making a new high of $141.82. And although we have not seen a confirmation of this breakout, we are going to establish a small position in anticipation of a follow through in the upcoming days.
Management and risk description
- We are approaching the trade with a single leg call option, keeping the risk to the premium paid.
- Allowing for this trend to unfold we are going to work with 16 June 2017 expiration.
- The trade uses less than 1% risk of account value of $25K
Underlying: IWM (Russell 2000 ETF).
Status: opening trade.
Trade: Buy +1 IWM 100 16 JUNE 2017 143 CALL at $2.10.
Maximum gain: unlimited (at expiration).
Maximum loss: premium paid ($2.10) * not including any commissions.
Breakeven: $145.10 (expiration).
Entry: today at the open.
Stop: no stop.
Target: Price target of $148 or profit target of 100%.
Time horizon: 4-6 weeks.
— Edited by Martin O'Rourke
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