RUT Update 4-17

This month I am highlighting a rather complex trade on the Russell 2000 index RUT. If you have been following along you know that it started with two overlayed Iron Condor positions, which were then supplemented by a Triple Calendar. There have been a couple of opportunities to garner profit and roll up vertical positions (you can see these below as simulated positions), but it has been mostly a rather benign month.

A couple of interesting things are happening, however, that might keep us guessing or create some adjustments. First, price has been creeping up. It's worth noting that the RUT has broken out of a rather long term downtrend channel... just over the last couple of days:

Second, the RVX - the index which track the implied volatility of the RUT broke below the multi-month support line. These two items have me considering the possibility that this counter-trend rally might be much more extended that I thought.  I don't know for sure, so I'm not making any moves now, but I'm sure preparing (see below).

The good news is that our RUT trade is still in really great shape. It's still profitable - even with the strong upward movement - and we still have some room to adjust if necessary. The four cheap 560 calls have helped us a lot on this trade, and are offsetting the negative Deltas quite a lot. If we continue to rise, those calls will kick in at a greater and greater rate. Meanwhile, here is my plan for the upcoming week:

• I am watching the 360/370 Put spreads very closely. They are getting cheap, and with any more positive price movement I may be in a position to roll them up, and lock in some profit.
• I am also watching the 530/540 Call spreads. If the short 530's hit a delta of 22 I will roll them up as well. This will mean taking a loss, but giving us a new credit and some more room. Since they are currently at 18 we have a little way to go, but it's on the radar. I'm guessing it would happen if the RUT hits around the 485 level.
• For the slightly longer term I have my eye on the 500 level of the RUT. This is my adjustment point for the calendar. If we hit it I will need to adjust the calendar.
• Finally, I have my eye on some fairly cheap Puts to buy as insurance. The calls have served us well, and now that we have moved away from the Put side I can get them for good prices. This will all depend on whether I roll up the Puts or not. If I do it will make a lot of sense to insure the new position a little, in the event of a strong down-draft.

You'll notice that most of these items address further upside pressure.  If things start to go the other way I'm not too concerned.   We'll see lots of dollar signs before anything needs to be done.  In fact if things dropped 20 or 25 points next week it might be time to take the whole trade off the table and count our chips.  That's what's on my mind for the coming week.

Good Trading...