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Options Trade Alert: RSX Russian Vector ETF

Stocks in this article: RSX

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- Strategic Mindset: Our strategic mindset at Top Gun Options is market neutral with possibilities of surges in volatility.

Target: RSX Russian Vector ETF (RSX) trading at $31.93.

Commit Criteria: It looks like Vladmir Putin will be the President of Russia again and it all happened with far less violence and protesting than was expected. There are protests and political risks associated with this Advanced Trade Alert, but the high IV and premium capture overcomes these concerns.





AP

We will be monitoring the situation in Russia, but our expectation is that things will be settling down now that Putin is the clear winner...even though it most likely wasn't the most fair and open election. Options on the RSX Russian Vector ETF is the tool we are using to capture the high premium.

RSX Implied Volatility is significantly overpriced relative to its forecast volatility of 5.79% over the trade period. We are looking for possible price movement but for it to stay within its $28 to $35 price range until the exit of this trade.

Tactic: Opening 30 RSX April 2012 Iron Condors (strikes 26/28/35/37 ) for a $0.53 credit

Tactical Employment of Iron Condor:

  • Buying to Open 30 RSX Apr 2012 $37 Calls
  • Selling to Open 30 RSX Apr 2012 $35 Calls
  • Selling to Open 30 RSX Apr 2012 $28 Puts
  • Buying to Open 30 RSX Apr 2012 $26 Puts
  • Net Credit: $53.00 per Iron Condor for a total of $1,590
  • Max Gain: $1,590
  • Max Risk: -$147 per Iron Condor for a total risk of -$4,410
  • Mid-Course Guidance: We will be watching for a price movement near the short strikes. As the short strikes are threatened we will adjust the Iron Condor as necessary.

    We don't want trade expectancy dropping below 4%. Based on this we have two price targets at which we need to consider an adjustment. RSX trading below $28.13 and above $34.38 are triggers for adjustment.

    Profitability Target: We will wait for this Iron Condor to expire worthless taking the $1590.00 credit as profit.

    Exit Tactic: We will wait for this Iron Condor to expire worthless in our Advanced Trade Alert Model Portfolio, adjusting as necessary.

    This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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