Options Traders Ride the Small Cap Wave with IWM Puts

The Russell 2000 (RUT) is the index that tracks the small cap stocks.  The IWM is the IShares Trust ETF that tracks the RUT. The IWM allows traders to play the small caps with options.

Our TNT options trading service saw an opportunity this past Monday to jump into the IWM as it failed and broke through a support level.  We focused on the IWM because of the tight markets and good liquidity.  It has high implied volatility, but at this point almost every stock and ETF has higher than average IV.

On March 9th, we highlighted the levels to our subscribers and provided multiple levels of entry.  As the stock gapped up on Tuesday the 10th, we warned of a failure to hold the gap level and it actually fell to make a lower low, but rallied into the close by the end of the day.  On Wednesday the 11th, the ETF open just below our recent resistance level which turns into support.  Once this was broken our subscribers knew to jump into the slightly ITM or ATM puts to ride this to the downside.  The ETF broke through three more of our support levels(targets): $128.76, $127.48, and $124.73.

It then rallied a little to close at the end of the day to close at $125.88.  This resulted in a move from $131.29 down to $125.88 or $5.41.

Option traders made profit of about $3.25 on the move with only investing about $2.70.  This resulted in a profit of about  120% ROI.