OP Readers,

3 Cheers. I took advantage of today’s brief rally and bought back my put leg (740/750) for $0.20 cents instead of waiting and letting it expire worthless. With this I have closed my Jan’07 RUT trade and I collected $310-$15-$20=$275 by risking $690 per leg. This resulted in 39.8% profit for this IC.

Here is the transaction detail:

For the month of Feb’07, I am looking to open another RUT IC i.e. 830/840/730/720 for $2.20-$2.30. My short strikes are 1 std dev away and the possibility of this IC expiring worthless are 89% on call side and 83% on the put side.

Here is the risk/reward graph: Reward $230/Risk $770 per leg. This translates to about 29.8% returns for 5-6wks holding period.

I have rolled up both the legs.
880/900 to 830/840 for $0.85 credit. Also reduced the spread from $20 wide to $10. I also rolled up 700 put to 710 for $0.90 credit and the similar to BCS also reduced it’s spread to $10.

With these adjustments, I have collected $3.20+$0.85+0.90= $4.95 (for my resulting 830/840/720/710 IC) and my current risk is only $5.05. If RUT remains between 720-830, my returns are going to be almost 98%.