RUT Weekly Calendar Trade #1 (Part 1)

This is the week I decided to junk the backtesting and try a real one live!

On Tuesday, RUT opened down on the day. I entered an order to buy 2 @ 7.40, which would have been around the mark or a little better. RUT rallied to 1265 and I did not get filled over the next few hours.

I canceled that order and did get filled on a 1265 spread for 8.14. The order was placed at the midprice and sat for two hours before I caved 0.10 and got filled about nine cents off the mark.

The market rallied on Wednesday and around midday, I rolled one of the 1265 spreads to 1280. I did this for six cents but I was down nearly 15% on the trade when it was done. I caved about 0.20 off the midprice to do this: one dime off each spread.

Today, the market tanked out of the gate. I ran some errands and came back 30 minutes into the session to see the market around 1256. I entered an order to close the DC at the midprice around 10:01. The market fell over one point in a minute and I ended up caving 0.95 over two minutes. I got filled 0.08 off the then mark, which ended up being 0.43 off my original limit price and 0.52 better than the modified order I had submitted to close. My total loss on the trade was an ugly 21.2%.

Think about that slippage for a moment: 0.43! I suppose that’s not horrible. That is roughly 0.11 per leg, which is usually the worst I would include in backtesting. The long options here were pretty expensive too and those spreads are pretty wide. One of my short options was 1.50/2.50. That seems a bit absurd. In fast-moving markets those spreads will widen and I guess given that, it’s not horrible to lose only this much in slippage.

I’ll cover a few more details about this trade in my next post.