NEW DIRECTIONAL CALL PLAYS
iShares Russell 2000 ETF - IWM - close: 115.66 change: -2.51
Stop Loss: 113.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 40 million
Entry on December -- at $---.--
Listed on December 10, 2014
Time Frame: exit prior to January option expiration
New Positions: Yes, see below
Why We Like It:
The IWM is the exchange traded fund (ETF) that mimics the performance of the small cap Russell 2000 index.
Wednesday proved to be a rough day for U.S. equities. The Dow Jones Industrials were off as much as -285 points near its lows for the session. It closed down -268 (-1.5%). The S&P 500 and the NASDAQ composite also dropped with -1.6% and -1.7% declines, respectively. Small caps tend to be more volatile so it's not surprising that the Russell 2000 index dropped -2.1% on the session.
So why are we adding a bullish trade on the IWM if they underperformed today? Just as the small caps tend to underperform on the way down they also tend to outperform on the way up. We are speculating that the market's current pullback will be over soon. Let me repeat this is a speculative bet that dip buyers are still out there. The average hedge fund manager has drastically underperformed the market this year and is desperate to generate some last minute gains before the year is over. Therefore they are likely to use this market pullback as an entry point for bullish positions.
Tonight we are suggesting a buy-the-dip trigger on the IWM at $115.00. This ETF has found support in the $114.35-115.00 area multiple times in the last few weeks. I would keep positions small to limit risk.
Trigger @ $115.00 *small positions*
- Suggested Positions -
Buy the Jan $115 CALL (IWM150117C115) current ask $3.14
Option Format: symbol-year-month-day-call-strike