Long Term RUT Trade

First let me answer the term "long term" and what it means to me. Long term can mean many different things to many different traders. I like to think of long term as 3 months, and 3 months is a long time in my opinion in the option market. Most of my trades that I set are front month options, but I like to have some long term strategies working.

Below is the chart of the $RUT and we are getting very close to a resistance point around the 650 level. Now I have been hearing a lot about this Lehman Brothers gap, and all about the heavy supply above that level. I would not be surprised if we bounced around that level before we either break higher or have a 3-7% correction. Also the $VIX is getting to the lower end of the channel which might signal a sell signal, unless we just bounce around like we have in the past, just keep your eye on a $VIX above $25.

Based on seasonality bullishness I like this ITM debit spread on the $RUT. At 90% probability of profit and very low management style, its a prefect candidate for my "long term" strategies. I also like credit spreads below 500 for Nov, and I currently have a calendar spread on the $RUT and I will be sharing more about that in a later post.