The first 20 minutes of the trading day could change EVERTHING. Details here.
I watch the Russell 2000 all the time, but I don’t love it as a trading vehicle. A lot of those companies are weak. That’s just the truth.
On this morning’s Profit Panel, show I said it out loud: “I don’t like the Russell, to be honest, but I do watch it all the time.”
I even joked that it can feel like they took the worst companies out of the Russell 5000, stuck them in the Russell 2000 and said “There, trade that.”
That’s why I’m careful with IWM, the Russell ETF.
Now — would I still trade it?
On today’s Profit Panel, Chris Pulver put on a put trade in IWM live on the show.
He walked through the parts, got his fill, and we talked through the risk. I summed it up this way: ‘Well, you also have a hedge on, though… Because you’ve got a put spread along with a naked put.’
Here’s what that means in plain English:
- A put spread is protection. You buy one put and sell another put lower. That defines your risk between those two prices.
- Selling one extra put the same as your lower strike from the spread brings in more credit. That’s income. But it also adds risk if price really dumps below that strike.
- The point is to keep it small and take profits quickly when you get the drift you want. This is not a “set it and forget it” type of trade.
We even talked about squeezing a little more credit by adjusting the date. But only if the chart and your rules still make sense.
My rules for this kind of IWM idea are simple:
- Small size. If you’re new, one contract is plenty.
- Defined risk first. The long put is your safety. Don’t skip it.
- Know your “uh-oh” level. If price breaks your line and stays there, don’t think twice, just cut it.
- Take quick profits. If you get a quick profit, ring the register. No need to be a hero in the Russell.
Bottom line: I don’t trust the Russell to behave, but I might still trade it — with a hedge, tiny size, and a plan.
If you missed this morning’s show, catch it all right here.
Stay sharp,
— Geof
