How to Play Further Downside Potential in Russian Markets with The Market Vectors Russia ETF (RSX)

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What is the short term fate of Russian markets? Economic sanctions have sent the country into dire economic straights but it seems that the worst is not over yet. The falling price of oil also puts pressure on the Russian economy and that pressure is reflected in the weakness of the Ruble and a collapse in Russian related equities. One way a trader can take advantage of further potential downside in Russian markets is with the Market Vectors Russia ETF (RSX).

The Market Vectors Russia ETF (RSX) is a fund that tries to emulate the yields and price performance of the Market Vectors Russia Index. The fund is highly linked to the Russian Index and invests 80% of its assets in securities that comprise the index, which is made entirely of Russian companies. Currently, RSX is up about 4% on the day and trading at $16.96. A full $4 off its 52-week low of $12.50, which was hit on December 1st of last year, while it’s still a ways a way from its 52-week high of $27.46 from July of 2014. The fund has total net assets of $1.88 billion and a year to date return of 21.80%. Despite this recent strength in the RSX weakness in oil and the possibility of more sanctions could provide traders an opportunity to short this bounce. RSX is still lower by over 28% over the past 6 months.

Potential Trade Setup: With the options market implying a move of around $2.70 by June expiration a trader can look for an options trade with a downside target around $15.30.

Trade: Buying the RSX Jun 16-15 Put Spreads for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $15.70

This trade offers better than 2-1 on a traders money and gives a trader great short side exposure with a clearly defined level of risk.


Andrew Keene

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