TheOptionPlayer.com sets up a Russell 2000 Index ETF (NYSE: IWM) short-term (37-day) option strategy (based on Wednesday’s closing quoted bid/ask mean)
Investors could simultaneously:
The difference between funds received and paid out is a $.58 per share credit which we keep if the Russell 2000 Index ETF closes below $141 and above $129 on May 19th, but immediately execute a trade adjustment if it appears the price is moving outside of these boundaries. If the price gaps higher or lower at the start of trading we might revise the strike prices. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
As evidenced in the chart below, the Russell 2000 Index ETF (IWM) has been confined to a trading range since the middle of February. Volatility levels are still heading higher along with elevated gold and Treasury bond prices that indicate money managers are nervous about equity valuations. Investors are still waiting on a huge tax cut from a healthcare reform bill or revised tax laws. Until the Trump administration and Congress put a deal on the table, investors will probably continue maintaining low equity levels going into the summer. Especially considering that April is regarded as the last of what is historically considered the best consecutive six months for market performance. Plus the Fed has signaled intent to reduce the assets on their balance sheet which might further reduce available liquidity.
Unless there is some unexpected domestic or global economic event that might shock the major indexes out their current range-bound trading environment, it is reasonable to expect the IWM ETF won’t be above our short call or below the short put the May 19th option expiration date.
52-Week High: $140.36
52-Week Low: $108.69
The information presented here is for educational and informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful.