Weeklies in RUT

I conducted some back tests over the weekend in RUT weeklies. It is difficult to provide a sufficient sample size because weeklies are relatively new and the so-called shorties (weeklies that can be initiated 20-30 days in advance) are even more new in RUT, only trading during the past few months. In the low volatility environment that has prevailed since January 3, RUT weekly time-spreads or calendar trades have worked well in tests and in real conditions. Back tests show, however, that the best general trade in weeklies remain iron condors. Iron condors work especially well during periods of volatility decline.

The iron condors that I tested is the so-called “low-prob, low touch.”  The trader sells shorts at approximately 15 delta and buys longs 10 points further from the money.   Included in the spread are back-month or -week debit spreads or long naked options to cut the delta to near neutral. These trades worked very well in 2012.  Successful condor traders in Seattle have lowered their profit targets during the first two months of 2013. But still expect their win ratios to be above 70%.

Butterflies and calendars work well in weeklies, but they clearly require more effort from the trader.

Always stay tuned to the market.

erasmus

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s