This Week’s Option Recommendation Buy the IWM October $102 put for $275 or less, good this week. The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the US equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index. Shares of the Russell 2000 Index Fund trade on the NYSE under the symbol “IWM”. The expiration date for this option is October 19, 2013. The option closed, Friday, $267 bid at $275. IWM shares closed at $102.39, reaching resistance. The 52-week range is $76.13-$105.63. The $102-strike put settled Friday as an “out-of-the-money” option, with its premium for time and volatility only. Your broker can give you more information on the small-cap stock index, but I’ll tell you why I like a put recommendation here. After a hot move up in July, the market began to correct and appears to be rolling over. Supply should be formidable. Friday’s bounce to resistance left the day with the look of a potential “hanging man” on my chart. This tells me to look for a move to underlying support. Support is at $99-$100 and $93-$95. Overhead resistance is at $103-$106. Traders may target a move in IWM toward $95. If IWM falls to $95, each $102-strike put will have $700 of intrinsic value. If my expectations go awry and IWM is at or above $102 on the third Friday in October, your option will expire worthless. That is your risk.
Posted on: Mon, 09 Sep 2013 04:19:38 +0000
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