January 12, 2023
Half Position: Buy Half of a Position of the Russell 2000 (IWM) August 185 Calls (exp. 8/18/2023) for $16 or less.
Very quietly, since Christmas, the indexes have staged a solid rally of approximately 5%. While it’s not the boom times of the late 1990’s, or 2021, perhaps more encouragingly, the rally has been slow and steady, and has been led by a “rolling bull market rally.” What I mean is the rally’s leadership has been moving day-to-day from the industrials, and then to the financials, and then mega-caps, and so on.
Because of this encouraging action, today I want to add a half position in the Russell 2000 (IWM) which, aside from the Dow Jones, is the first of the major market indices to break above its 50- and 200-day moving averages, and will give us bullish exposure to a market rally should it truly get going.
To execute this trade you need to:
Buy to Open the IWM August 185 Calls
The most you can lose on this trade is the premium paid, or $1,600 per call purchased.
The risks I see in this trade are the obvious … should the market implode yet AGAIN, our calls will likely fail.
That being said, having taken partial profits in LVS and VALE this week, which lowered our market exposure, and with the VIX falling below 20, and more and more stocks showing signs of life, the risk/reward in buying a half position in the IWM looking for a further rally this year is right.
|Position (Original)|| IWM August 185 Call|
|Position Strategy||Buy Call|
|Opened Date||January 12, 2023|
|Expiration||August 18, 2023|