03/25 RUT HP - MAY09

Started a new HP for MAY contracts. I've decided to drastically reduce my size and focus on the craft and not to worry about P&L. The plan for this trade is simple: stay in it untill get the profits. Or bail out if we go down by 1.5x my cashflow. I'll execute this trade month-after-month and my expectation of profits on the long run is 75%.

With time I can understand how this trade works and better manage it, but so far I've been adusting all my HP to loss, so I'll just stick with a no-touch plan for a while. I've estimated that -1.5x cashflow equates to a delta of .22 on the PUT side and .27 on the CALL side, so I'm setting the contingent orders based on Delta, so I don't have to spend too much time every day adjusting the stop by RUT's price level.

Probabilities:
84% implied probability it will expire profitable
98% historical probability it will expire profitable

Bellow is the risk profile and trade plan.