• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

Trade Alert - (IWM) May 22, 2012

Trade Alert

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Trade Alert (IWM)

Expiration of the Russell 2000 iShares (IWM) May, 2012 $77 puts in the money at $1.98

Closing Trade

5-18-2012

expiration date: 5-18-2012

Portfolio weighting: 20% = 28 Contracts

We came within a hair?s breadth of walking away with the entire premium on our short position in the Russell 2000 iShares (IWM) May, 2012 $77 puts. The broad market weakness in the wake of the Facebook (FB) failure caused those fanciful dreams to go up in smoke. When you play at the deep end of the pool, this is the sort of thing that happens sometimes.

Still, I was so convinced that shorting the (IWM) would do well in coming days that I over hedged the short position through adding an extra 5% long in the (IWM) June $80 puts when we were still well out of the money on the $77?s. That one tactical move that I took three days earlier effectively covered the entire loss on the $May 77 puts, and then some.

The (IWM) tried valiantly to rally into the Friday close. But it might as well have been a salmon swimming up Niagara Falls during the mating season. It nosedived and finished at $74.69, creating a humiliating loss of ($77.00 - $74.69 + $0.33 = $1.98). The cash loss on the position is (100 X $1.98 X 28) = $5,544, or 5.54% for your notional $100,000 portfolio.

The lucky people who had (IWM) shares put to them in their Monday morning statements at of cost of $77were able to sell into the ferocious rally that ensued. They ended up recovering all of their losses and making a profit on this trade. This is how it often works out with options expirations. A spike down close on a Friday is followed by a gap up opening on Monday.

I am sure that we will be revisiting the short side on the (IWM) once again, probably in the near future. Greece, Facebook, the May selling, the American fiscal cliff, the rotten economic data, the end of Q1 earnings reports, a possible resumption of the US debt crisis, and the fact that the San Francisco Giants are unlikely to make it into the playoffs this year, could all combine to create a perfect storm. In fact, I?m kind of hoping we get a flash crash.

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
https://www.madhedgefundtrader.com/wp-content/uploads/2011/12/investing-a-z-stock-market-game-for-students.jpg 240 320 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2012-05-22 13:39:382012-05-22 13:39:38Trade Alert - (IWM) May 22, 2012

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: Trade Alert - (BA) May 22, 2012 Link to: Trade Alert - (BA) May 22, 2012 Trade Alert - (BA) May 22, 2012 Link to: May 23, 2012 - Quote of the Day Link to: May 23, 2012 - Quote of the Day May 23, 2012 - Quote of the Day
Scroll to top