Update to Retail Index Vol Short

• stevenplace
• December 11th, 2009

After 3 months of consolidation, it appears that XRT is on the verge of a breakout:

And our current position is currently on the short side of the calls:

This leaves us very sensitive to any strong upside movement, and could wipe out our gains by next week.

To hedge against that, I am willing to pull some returns off the table in order to protect our upside. Here’s the new trade:

BUY +5 XRT 100 DEC 09 36 CALL @.26 LMT

And here is our new risk profile:

This gets us into a nearly delta neutral trade, and we still have good theta to the downside. We reduce our gains if XRT runs to 36, but we make it back above 37.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: $XRT

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