IWM: Small Cap... trade idea

[Kingran]

I have added to my existing positions on 1/11, did some put selling and couple of covered call, hoping the stock goes down and I can keep the call, that didn’t go as planned. Now, I am thinking of doing some leaps and buying outright shares. Any interest rate cut will significantly help the index to move to $255 immediately and much higher overtime.

If you see from 2009, over 10 years the index gained 360%. Especially considering the underperformance compared to SP500, last 2 years, I think there is a chance IWM outshoots beyond $255.

Starting Date	1-Mar-09
Ending Date	8/31/2018
Start Value	42
End Value	173.00
# of years	9.00
AGGR	17.03%

[Kingran]

The above is technical, for the fundamental leaning folks…

• Most companies in R2K has floating rate debt, so they benefit from rate cut
• 40% of R2K companies are unprofitable, so any rate cut, will help them to get to profit
• PE is 12 (Yeap)
• Price to BV is discount to SPY by 45%
• If you think large cap, mega-tech had rallied hard, a catchup by small cap, or rotation will propel this.

Of course, you can go and find the “hidden gem” or the individual names which will certainly outperform the index. For simpleton folks like me, just buy the right index and ride it