RUT spent the week doing the most annoying thing a short-premium book can face: drifting lower without any fear. The index slid from 2,904 Monday morning to 2,859 by Wednesday — about 1.5% — while the VIX fell from 17.9 to under 15. No spike, no panic, just a quiet bleed lower. By Wednesday's close, my short puts had gone from the 17 delta I sold them at to 40 delta. This is the story of Thursday's roll: every leg, every number, and the one move I deliberately did not make.
What a Quiet 1.5% Drop Does to a 17-Delta Put
I sold the October 9 puts at 2,810 and 2,825 with three weeks to expiration, targeting the ~17 delta my scan logs all day. A 1.5% drop doesn't sound like much. But at 23 days to expiry, a 17-delta put sits roughly 1.2% out of the money — so a 1.5% move doesn't just threaten the strike, it walks straight past it. Wednesday's close: the 2,810s at −36 delta, the 2,825s at −40.
The calls went the other way, of course. The 3,105 calls — 8.6% out of the money by Wednesday — were nearly free. I bought them all back mid-week for close to nothing, banking the decay and leaving the book short puts only for a day.
NOTE: I normally don’t sell and make this asymetic bet, however, because the fed decision was on Wednesday, I know there is almost always some two sided movement over Wednesday and Thursday, so I can get back in on Wednesday afternoon or Thursday morning. I have done this exactly once, so please don’t think it’s part of my trading plan!
That asymmetry is the honest cost of selling strangles into a falling market: the put side ages in dog years while the call side goes dormant.
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