I am researching the use of options in swing trading the Russell 2000. It appears there are options traded on the IShares Russell 2000 ETF (AMEX:IWM) on the CBOE (IWT) and the AMEX (XIP). It also appears there are are options traded on the index itself (RUT) at CBOE. I assume, perhaps, there are also options traded on the Russell 2000 futures. My question is: where would I find the most liquidity?
This is my favorite option trade. I trade the large index in 1-3 lots on straight directional bets on the Index itself. I do not pay the spread, but instead bid or offer just inside the NBBO and weight for the noice to auto execute against me. For directional swing trading, I like this, as R2k has some trend persistency that other indexes dont. As always, try to lose as little as possible.