IWM Put Credit Spread CASE STUDY

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------------------------------------------------------------------------- This communication/content is for informational purposes only and is not intended as personalized investment advice, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This communication should not be relied upon for purposes of transacting in securities or other investment vehicles. Trading options carries a high degree of risk and may not be appropriate for all investors. Options can lose value rapidly and a position may expire worthless. Some strategies can result in losses greater than your original investment. Past performance is not indicative of future results. This video is for educational purposes only and should not be construed as financial, investment, tax, or legal advice. Consult your personal financial advisor or other qualified professional before making any investment decisions. Do not trade with capital you cannot afford to lose. ------------------------------------------------------------------------ ➡️Join Income Academy Today! ⬅️ https://www.skool.com/incomeacademy/about?ref=2d43635c92e246c4b6b849ed1dd7e52e ------------------------------------------------------------------------ IWM put credit spreads tend to underperform comparable QQQ and SPY put credit spreads when traded mechanically off the 200-day simple moving average because the underlying index (small caps) has been weaker, choppier, and more volatile than large-cap benchmarks over the past decade-plus. Core structural reasons Weaker trend vs 200 SMA. Over the last 10+ years, small caps (Russell 2000/IWM) have materially underperformed large caps (S&P 500 / Nasdaq-100), with the Morningstar US Small Cap Index lagging the corresponding large-cap index by almost 5 percentage points annualized, while also being more volatile. That means fewer strong, persistent uptrends above the 200-day SMA for IWM and more time chopping around or below it, which is structurally bad for bullish put spreads keyed to “price above 200 SMA.” More volatility and noise around the 200 SMA. IWM’s realized volatility and range are consistently higher than SPY and QQQ; one discussion notes IWM’s ATR around 1.82% versus 1.0% for SPY and 1.38% for QQQ, implying ~32% more range than QQQ and ~82% more than SPY. More volatility relative to trend quality means more whipsaws around the 200 SMA: price crosses above, triggers a “bullish” put spread entry, then snaps back down and challenges or breaks those short strikes more often than in SPY/QQQ. Inferior long-term drift and factor headwinds. Historical comparisons show the Nasdaq-100 has significantly outperformed the Russell 2000 over long windows, reflecting different sector composition and quality profiles. At the same time, multiple analyses note that small caps have not been paid for their higher risk in the recent era, underperforming large caps with greater volatility. Selling puts in a weaker asset with less positive drift (especially during times when it tends to lag) naturally leads to more touch events and deeper drawdowns versus selling puts in upward-biased, mega-cap-heavy indexes like QQQ and SPY. How this interacts with a 200 SMA rule Trend filter works better on strong, liquid benchmarks. The 200-day SMA is a blunt regime filter: it works best when the underlying index has clear bull/bear regimes and spends long stretches well above or below the average. SPY and especially QQQ have had long, powerful runs where the price rides meaningfully above the 200-day, making bull-put spreads “under the market” relatively safe during those phases. IWM, by contrast, has repeatedly failed to hold above its long-term averages, showing more frequent breakdowns and “fake” rallies that roll over, so credit put spreads entered only because price ticked above the 200 SMA face more adverse moves. More time in marginal conditions. Commentary on Russell 2000 behavior notes that it has often traded below both the 50-day and 200-day moving averages and struggled to reclaim key support levels, highlighting relative weakness versus the S&P 500 and Nasdaq-100. If your rule is “sell put credit spreads when price is above the 200 SMA,” IWM simply offers fewer “clean” trending windows and more entries that occur just as price is retesting that average from below or drifting sideways, creating poor reward-to-risk even for high-probability spreads. Volatility skew cuts both ways. IWM’s implied volatility and IV rank are often higher than SPY/QQQ, which looks attractive for short premium. However, the same higher beta and volatility mean that when trades go wrong, they can go wrong faster and deeper, and the underlying’s weaker trend gives you less of that “index drift bailout” that often saves SPY/QQQ bull-put spreads initiated a bit too aggressively.