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October 8, 2013  Tue 3:47 AM CT

RSX: SEE CHART GET CHAIN FIND STRATEGIES
A large trade is looking for a sharp move up or down in the Market Vector Russia ETF.

More than 23,000 RSX contracts traded yesterday, about 10 times its daily average for the last month. The puts and calls traded in roughly equal volume, and almost all of the action was in the May options.

optionMONSTER systems show that a trader bought 5,500 May 22 puts for $0.48 and the same number of May 34 calls for $0.39. There was no open interest at either strike, indicating that this is new positioning. The trade, known as a strangle, is looking for the RSX to move sharply higher or lower. (See our Education section)

Later in the day, 6,000 each of the May 28 puts and May 29 calls traded, with the puts going for $2.10 and the calls bought for an average of $1.825.

The RSX gave up 0.64 percent to close at $28.70, in the middle of its recent range. The exchange-traded fund was below $24 in late June and at a 52-week high above $31 in January.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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