This article will compare and contrast the RUT (Russell 2000 cash-settled index) with the IWM (ETF that tracks the Russell 2000). In order to do this justice, an identical option strategy, the iron condor, will be placed on each of them. Next, we will focus on the similarities and then, the differences will be emphasized.

PART I: Lay of the Land

Figure 1 shows the weekly trades on the RUT & IWM that were placed on Thursday 3-29-2012.

Figure 1

The specifics for each of these two trades are listed below in the next two figures. Iron Condor on the RUT BTO + 1 Apr wk A 850call @ 1.05 STO – 1 Apr wk A 845call @ 1.67 RUT on (3-29-12) $828.78 STO -1 Apr wk A 795 put @ 2.34 BTO +1 Apr wk A 790 put @ 1.88 Max Profit = 1.08 Max Loss = 3.92 ROR = 28% minus commissions Figure 2: Iron Condor on the RUT Let us move on to the Russell 2000’s exchange traded fund, IWM, which trades at one-tenth of the RUT value. Iron Condor on the IWM BTO + 1 Apr wk A 85call @ 0.12 STO – 1 Apr wk A 84call @ 0.28 IWM on (3-29-12) $82.25 STO -1 Apr wk A 79 put @ 0.20 BTO +1 Apr wk A 78 put @ 0.13 Max Profit = 0.23… Continue Reading