What is the ETF IWM?
Ishares Russell 2000 ETF (IWM) is an Exchange-traded fund. The IWM ETF seeks to mirror results that correspond to the price and yield performance of the Russell 2000 index. The IWM ETF offers exposure to small public companies. It offers access to 2000 small cap domestic stocks in a single fund. The IWM ETF is seeks long-term growth.
What is the Russell 2000 Index?
The Russell 2000 index measures the performance of the small cap segment of the US equities. The Russell 2000 index includes approximately 2000 of the smallest securities based on a combination of their market cap and a current membership. The Russell 2000 index provides a comprehensive and unbiased small cap barometer. The Russell 2000 index is completely reconstructed annually.
Can a trader trade IWM Options?
When trading options some things are just not worth it. Options have high volatility. A trader might be up 20% one second and down 50% the next when trading options. This can be fool’s gold. The main problem with some options is the difference in the bid/ask spread. If a stock or ETF does not have much volume usually the options bid/ask is so wide that just a purchase of that option would put the trader at more that 10% loss. When the trader goes to sell they would lose another 10% on that trade. A trader would have to make 21% to just break even. The IWM ETF has enough volume that the difference in the bid/ask make it ok to use to trade options.
Trend Following IWM
The IWM ETF has is a good index to follow with your long-term trend following strategy. Historically the Russell 2000 index and the IWM ETF have performed well when used in a long-term trend following system.
As you can see with the above chart the Russell 2000 (IWM) ETF is a very good index to use when you are trend following long-term. So the IWM ETF is a good ETF to use in a trend following model. With trend following it really does not matter if a stock or ETF is going up or down it just needs to move in one direction for an extended period of time.I