Market Vectors Russia ETF (RSX) seeks to track the performance of the DAXglobal Russia+ Index (DXRPUS). This index is comprised of publically traded companies based in Russia. Shares of RSX are currently trading around $28.65 in a 52 week range of $23.94-$31.15. RSX has been underperforming the broader us equity market this year with shares falling 4.25% year to date. Despite this weakness options traders have been making some very bullish bets on RSX. On Wednesday traders came in and bought several large blocks of Dec 29 calls for $0.40 to $0.45. These trades took place at volume greater than open interest in any line in Jan expiration. Open interest in the Dec 29 call line has now swollen to over 12,000 contracts. This action is very bullish and serves as a signal for a long setup in RSX. We want to look at a covered call set up in RSX.
Trade Buying 100 shares of RSX at $28.65 for every Dec 29 Call sold for $0.55
Reward: $90 per 1 lot
Breakeven: $28.10
If shares of RSX close above $29.00 on Dec expiration this trade will net its maximum potential profit of $90 per 1 lot. This trade will also net some profit anywhere above $28.10. Should RSX close above $29.00 on expiration this trade will net an annualized return of 38.9%.
