Rolling a trade in IWM
- themoneyloaf
- May 1
- 3 min read
Happy Sunday!
April is shaping up to be a great month for trading options, but of course it didn't start off that way.
This week's update features a trade that got into a bit of trouble during the tariff-induced volatility, and what I'm doing to manage the position.
This week:
Rolling a trade in IWM
Rolling a trade in IWM
IWM is an ETF that tracks the Russel 2000, a collection of small-cap stocks. The market was already showing signs of volatility in March, so I decided to set up a jade lizard at the $193 put strike and $220/222 call strikes expiring April 17.
This initial trade was put on for $360 in premium.
Because a jade lizard is one of the strategies I teach in my course which involves selling option on both the call and put side. Since the stock can only be at $193 or $220 (but not both), the best case scenario is for the stock to bounce between $193 and $220 and slowly lose value over time.
Of course we all know what happened, the market took a big drop thanks to the fallout over global tariffs, and IWM dropped just under $175 in April, nearly $20 in the money.
As is always the case in such situations, the first line of defense is to roll the put out in time, and to a lower strike if possible.
Thanks to the heightened volatility during that period, I was able to roll just the IWM $193 put down to $192, to the May 9 expiration. This was done for an additional $85 premium.
The $220/222 call spread was so far out of the money at this point, I didn't even want to pay commissions to close them and just left them to expire worthless, another nod to the flexibility of the jade lizard.
This week, as the market rallied, I took the opportunity to sell a $192/194 call spread to re-establish the jade lizard, taking in another $70 in the process.
So now I have a new jade lizard and a total premium of $517.
The best case scenario is IWM stays within a $2 range of $192, which will allow me to close it for $200, leaving $317 in profit. I'll update how this trade goes in 2 weeks when it expires on May 9.
Even though this position isn't immediately working out for a profit, I think learning how to manage difficult positions is as important (or maybe more important) than placing winning trades.
Because if April has taught us anything, it's that crazy things can happen in the markets and we need to know how to manage different positions and risk accordingly.
As always, you can join my private community and receive these same updates and management of trades in nearly real-time.
Closing thoughts & useful links
Last week I hoped earnings would bring the opportunity for new trades, and indeed they did, with new trades in KMB, PEP and PG.
Next week is an even busier week on the earnings front, I'm looking forward to any more opportunities that may come.
Oh, and I don't think for a second that this period of volatility is over. The market may have rallied this week, but things are not back to “normal” by any means.
Have a good weekend!
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This article is for educational purposes only. This is my own portfolio which is being managed according to my goals and risk tolerance. Your situation is likely different and you should do your own due diligence before investing in stocks or options.
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