RUT Credit Spreads - interactivebrokers.com · RUT options offer portfolio managers an efficient...
Transcript of RUT Credit Spreads - interactivebrokers.com · RUT options offer portfolio managers an efficient...
Interactive Brokers Webcast
RUT Credit Spreads
Russell Rhoads, CFA
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Options involve risk and are not suitable for all investors. Prior to buying orselling an option, a person must receive a copy of Characteristics andRisks of Standardized Options. Copies are available from your broker orfrom The Options Clearing Corporation at www.theocc.com. Theinformation in these materials are provided for general education andinformation purposes only. No statement within these materials should beconstrued as a recommendation to buy or sell a security or to provideinvestment advice. Supporting documentation for any claims,comparisons, statistics or other technical data in these materials isavailable by contacting Cboe at www.cboe.com/Contact. Multiple legstrategies involve multiple commission charges. Cboe® and VIX® areregistered trademarks, and Cboe Global MarketsSM and RUTSM are servicemarks of Cboe Exchange, Inc. Russell 2000® is a registered trademark ofFrank Russell Company, used under license. All other trademarks andservice marks are the property of their respective owners.
© 2018 Cboe Exchange, Inc. All rights reserved.
Disclosure
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Russell 2000 IndexRUT Options Trading Examples Resources / Questions / Contact
Outline
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The Russell 2000 (RUT) is considered a benchmark for small cap stock performance in the USRUT options offer portfolio managers an efficient method of hedging portfolio risk or increasing income for a small cap portfolio Although both the S&P 500 and Russell 2000 are broad based benchmarks representing US stock market performance, the price behavior of the two often diverge
Russell 2000 Index
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RVX vs. VIX Index
Data Source: Cboe Global Markets
Russell 2000 Index
10%
20%
30%
40%
50%
60%
70%
80%
1/3/17 2/23/17 4/13/17 6/5/17 7/25/17 9/13/17 11/1/17 12/21/17
RVX / VIX Premium
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RVX vs RUT Realized by Year
Data Sources: Cboe Global Markets and Bloomberg
Russell 2000 Index
-4
-2
0
2
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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RVX vs. Russell 2000 Realized Volatility
Data Sources: Cboe Global Markets and Bloomberg
Russell 2000 Index
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5
10
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25
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
RUT 21-DayRealized
RVX
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Expirations Available – February 1, 2018
Blue = PM Settlement Red = AM Settlement
Russell 2000 Index Options
2-Feb-18 23-Mar-18 21-Sep-189-Feb-18 29-Mar-18 28-Sep-18
16-Feb-18 20-Apr-18 21-Dec-1823-Feb-18 30-Apr-18 31-Dec-182-Mar-18 31-May-18 21-Jun-199-Mar-18 15-Jun-18 20-Dec-19
16-Mar-18 29-Jun-18 18-Dec-20
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February 1, 2018 – RUT @ 1578
Russell 2000 Index Options
9-Feb 16-Feb 23-Feb 2-Mar 9-Mar1580 Call Bid 12.90 17.60 21.40 25.00 28.301590 Call Ask 8.80 13.50 17.00 20.50 24.00
Bear Call Credit 4.10 4.10 4.40 4.50 4.30Bear Call Risk -5.90 -5.90 -5.60 -5.50 -5.70
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February 1, 2018 – RUT @ 1578
Russell 2000 Index Options
9-Feb 16-Feb 23-Feb 2-Mar 9-Mar1575 Put Bid 12.00 16.60 20.10 23.20 26.801565 Put Ask 9.00 13.30 16.80 20.00 23.50
Bull Put Credit 3.00 3.30 3.30 3.20 3.30Bull Put Risk -7.00 -6.70 -6.70 -6.80 -6.70
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Monday January 22 – RUT at 1597
Bull Put Spread ExecutedSell RUT Jan 26th 1580 Put at 4.80Buy RUT Jan 26th 1575 Put a 3.85
Net Credit = 0.95
Trading Examples
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RUT 1580 / 1575 Bull Put Spread Payoff Diagram
Trading Examples
-7.50
-5.00
-2.50
0.00
2.50
5.00
1565 1575 1585 1595 1605
RUT @ 1597
Jan 26th
Close1608.06 -4.05
+0.95
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Wednesday January 17 – RUT at 1590
Bull Put Spread ExecutedSell RUT Jan 26th 1550 Put at 2.88Buy RUT Jan 26th 1500 Put a 0.93
Net Credit = 1.95
Trading Examples
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-50.00
-40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
1500 1520 1540 1560 1580 1600
RUT 1550 / 1500 Bull Put Spread Payoff Diagram
Trading Examples
RUT @ 1590
Jan 26th
Close1608.06
-48.05
+1.95
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Friday December 22 – RUT at 1543
Bear Call Spread ExecutedSell RUT Dec 29th 1570 Call at 1.25Buy RUT Dec 29th 1580 Call at 0.70
Net Credit = 0.55
Trading Examples
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-15.00
-10.00
-5.00
0.00
5.00
1530 1540 1550 1560 1570 1580 1590
RUT 1570 / 1580 Bear Call Spread Payoff Diagram
Trading Examples
RUT @ 1543
Dec 29th
Close1535.51
-9.45
+0.55
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Wednesday November 1 – RUT at 1509
Bear Call Spread ExecutedSell RUT Nov 3rd 1525 Call at 3.40Buy RUT Nov 3rd 1535 Call at 1.55
Net Credit = 1.85
Trading Examples
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-10.00
-5.00
0.00
5.00
1485 1495 1505 1515 1525 1535 1545
RUT 1525 / 1535 Bear Call Spread Payoff Diagram
Trading Examples
RUT @ 1509
Nov 3rd
Close1494.91
-8.15
+1.85
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Questions / Comments?
Cboe Resourceswww.cboe.com/rut
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Twitter - @Cboe
Contact – [email protected] – @RussellRhoads
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