I was just wondering...how many of you trade IWM options? how does this compare to SPX or SPY options?
IWM is of course the mini version of the RUT as the SPY is to the SPX. They are highly liquid and if you look at volume very popular trading vehicle. Easy to get in and out. Currently I have a put diagonal that has worked out ok.
I like using IWM options to hedge my small cap book. Currently plain short IWM though for my 1:1 hedge since premium is still a tad expensive IMO.
what's the maximum amount of days do you trade the IWM... say the option is in the negatives, do you have a rule that next time the option evens out...you close the option due to time depreciation affecting the option in a matter of days? If so, how many days?
no "rules" no "days"...remember its just a trading vehicle. If you think the market...esp small cap is gonna go up you buy...if you think its gonna go down you sell. If you think the vols will increase then you might try a calendar or diagonal if you think they may go down you might try selling the straddle. You use it to place your bet on volatilty or direction. period.
I've been fooling around, both with the SPY and with IWM, with using the vol indices - respectively the VIX and the RVX - to give signals on these guys far as when to buy puts or calls. Just started, so not a lot of results yet, except for backtesting, but the backtesting came up with decent results, once you figure out how to "predict" where the vol indices are going, and so far real life is working out OK too. I'll have a better idea on this in a few months.
Don't laugh: I do everything on Lotus. It's what I started with in 1985. I'm...old school, I guess. If it ain't broke, don't fix it.