Why are so many rule based butterfly strategies based on the RUT?

M12

New member
I know several coaches which sell rulesets for BF trading. Many of them use the RUT as Underlying. What are the benefits of the RUT? It's liquitity is not really good. There are several underlyings with much better volume.
 

status1

Well-known member
This is just my opinion but I feel RUT is less volatile than SPX because of all the tech stocks that are in the SPX so any news on the tech stock will move the SPX a lot

Another factor is the size or the underlying If you look at the RUT 10 years ago it was less than 1000 now it's almost double while SPX is more than double so a certain percentage move in RUT is going to move the SPX a lot more so you not only have to make the tent wider on a BWB in SPX but also have to keep a closer eye on it and be ready to make aggressive adjustments and maybe even reverse it the next day
 
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vega4mike

Member
This is just my opinion but I feel RUT is less volatile than SPX because of all the tech stocks that are in the SPX so any news on the tech stock will move the SPX a lot

Another factor is the size or the underlying If you look at the RUT 10 years ago it was less than 1000 now it's almost double while SPX is more than double so a certain percentage move in RUT is going to move the SPX a lot more so you not only have to make the tent wider on a BWB in SPX but also have to keep a closer eye on it and be ready to make aggressive adjustments and maybe even reverse it the next day
Not sure that RUT is less volatile than SPX, just having a look at the IV's , implies RUT to be the more volatile, hence, the premiums tend to be richer, looking at the historical volatility , they tend to be the same.
 

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status1

Well-known member
Maybe the volatility was the wrong word to use I just think because of the size of the SPX it can move a lot more points so a 1% move in SPX would be a bigger loss than in RUT I just don't think you are getting enough credit for the potential size of the move in SPX
Looking at the weekly ATR in RUT is around 87 down from around 110 at the moment while SPX is around 158 down from 199 so if you trade lets say a 60/50 BWB in each one with a 3% down move in rut you are down about $50 and still under the tent while in SPX you are down $130 and are outside the tent
Maybe I am not looking at it the right way I just no longer feel comfortable trading SPX at these levels
 

vega4mike

Member
True, but that just means you have to use different widths for the SPX , given it's a much larger product. I have traded both & feel much more comfortable trading SPX due to its depth & liquidity, so I guess it boils down to what one is most comfortable trading with.
 

status1

Well-known member
True, but that just means you have to use different widths for the SPX , given it's a much larger product
That was my opinion as well but you also use more margin in that case although you could do less contracts
In a few more years maybe RUT will be at the same level as SPX now and SPX might be near the NDX levels which will make it more challenging to trade all the indexes
I am starting to switch over to XSP which is also 1256 contract and cash settled and you don't pay the SPX index fee
Maybe not as popular at the moment but if SPX and RUT keep going higher it may come a point where it will be increasingly difficult to trade just my opinion
 
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