New Trade Entry: RUT Weekly Put Credit Spread for June 2 cycle, which expires June 14. Below is the position entered earlier today:
RUT Position Entered Friday, June 7, 6 days prior to expiration. The option code for this cycle is: RUT130614. The last day to trade this cycle is Thursday, June 13.
RUT June 2 Put Credit Spread shortly after entry
Time of entry: 12:00 noon Eastern. RUT price: 987.24 at entry; RVX at 20.00
SOLD June 2 960 Put. Delta -.16 at time of entry.
BOUGHT June 2 950 Put
Credit received: $1.01
Maximum margin/risk is $899. Maximum risk is the width of the spread ($1,000 less credit received $101).
Target Gain: $75.75 (75% of credit received). This gain represents a 8.4% gain on actual margin.
Maximum Loss: $101
I recommend that a "good to cancel" order be entered to close the position for either target gain or max loss. This can be done using an OCO (one-cancels-other) order on most broker's platforms. Each broker is a bit different; I suggest that you contact your broker for the proper setup of the OCO. Having this in place removes the emotions that can sometimes cloud a trader's judgement, and reduces the amount of time needed to be at your computer monitoring the position.
SPX moved over 1 standard deviation today with the release of the monthly non farms payroll report, outside the guidelines for trade entry.
For those unfamiliar with this trade, the guidelines were published on May 12, 2013. The article can be found here: Link to Articles
The original guidelines call for a Tuesday entry, however, with the volatility at this level, there is usually sufficient credit to enter any day up until Friday.
I will post an update as the trade progresses.
As always, stay keen on your risk management and trade carefully.