I exited the RUT trade yesterday. It was not an easy trade and I had locked it into a stable position as I reported in a previous post. I had a great opportunity yesterday to get out at a small profit and be ready to reuse the margin I had tied up in the trade.
As I had written, I was expecting a rally but did not know where from. Yesterday I found that spot. Below is the MarketProfile chart of the ES. The last two Profiles are a split of yesterday's action. The two horizontal lines represent major support.
The market traded down to that support area and held, so I sold out my long August PUTs in the RUT and started covering my short PUTs after the market took out the high of the day. I covered all the way to the bottom of the previous day's Value Area where I became flat and the trade was closed. I could have waited till closer to expiration to close the trade as the position had no risk to the upside and I did expect the rally but I had considerable margin tied up in a position with only very limited profit possibility - see the risk graph of the previous RUT post so 2% was good in the circumstances and allows me to re-invest the margin.
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