NEW DIRECTIONAL PUT PLAYS
iShares Russell 2000 ETF - IWM - close: 115.18 change: -1.38
Stop Loss: 118.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 29.0 million
Entry on September -- at $---.--
Listed on September 08, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
The S&P 500 made it 14 days in a row without a move of more than 0.5% on a closing basis. Jonathan Krinsky at MKM Partners noted this occurrence yesterday. Krinsky said the last time we saw a streak this long was 1995. To find a streak longer than 14 days you have to go back to 1969, which saw a run of 20 days in a row. Today would have been the 15th day but stocks started to move and the direction was down. Small cap stocks were leading the way with the Russell 2000 falling -1.1% versus the -0.6% drop in the S&P 500.
Market watchers were blaming the rising dollar and new fears that the Federal Reserve might raise rates sooner than expected. There is speculation that the Fed might drop its "considerable time" guidance for low rates in its policy statement at the Fed meeting scheduled for next week.
Whatever the reason small caps look vulnerable and underperformed on above average volume today.
We want to hedge our bullish bets with a put position on the IWM just in case the market does start to correct lower. Investors might be growing nervous about the 9/11 anniversary on Thursday. You could call this put a little 9/11 market insurance.
Tonight we are suggesting a trigger to buy puts at $114.85.
Trigger @ $114.85
- Suggested Positions -
Buy the OCT $115 PUT (IWM141018P115) current ask $2.54
Option Format: symbol-year-month-day-call-strike