Trade idea and Commentary on RUT

RUT is currently at around $1226. Two weeks ago it was knocking at all time high levels near 1280. RUT has been down about 4-5% in 2 weeks. SPX, on the other hand, has gone from 2113 to the current level of 2090, only down 1% in the last 2 weeks. Quite a difference! RUT has been more volatile and is trading at current implied volatility levels for 30 day options of around 17. SPX 30 day options are around 13.

Trade idea: Income Traders are looking for a little more premium and RUT current volatility levels around 17 offer a little more juice than SPX with a paltry 13 implied volatility. Looking at RUT and the June 5 expiration. Considering an Iron Butterfly trade. RUT currently at $1226. Buy one 1260 call and sell one 1230 call. Buy one 1190 put and sell one 1230 put. Total credit of around $2600 and total risk or margin of $ 1400. Looking to make around $200 or around 15% on margin or risk of $1400.Starting out pretty delta neutral and short Vega. My premise is that RUT will be range bound to slighter higher over next few weeks. If I was down $300 on this trade, I would exit, and live to play another day.

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