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.
Tickers: $XRT
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Steve Place is a professional derivatives trader, focusing on equity options. He has a degree in Electrical Engineering with specializations in Signals Processing, Stochastics, and... More »
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