Russell 2000 Usually Leads The S&P 500 On The Way Down, So Buy Puts Here
The Russell 2000 is down now by -1.00% for the day at 1:50 p.m. EDT. Meanwhile, the S&P 500 is higher by 0.15%. So why is this important?
At most peaks, the Russell 2000 begins to drop ahead of the S&P 500. Let's look at this concept and see how it has played out in 2018. For comparison, we use SPY as our proxy on the S&P 500 and IWM on the Russell 2000.
Note that so far this year the Russell has not lagged the S&P 500 in turning down. It has led at the January, March and April peaks.
This led us to establish a new put trade in SPY for Options Index Trader today that should pay off over the next few days.
We consider this to be a "fat pitch" setup that should bring about some nice gains for our readers.