Good trade on IWM 209 strike puts today. I went into the week thinking that small caps were set up to run higher but when I saw how much bond yields were spiking this morning I knew I had to change my thesis short term.

TNX is the ticker symbol to watch for the 10yr bond yield. As that rises sharply, small-cap companies are usually hit the hardest. The IWM index had relative weakness this morning and a major component of IWM is the KRE index(made up of regional banks) and KRE also had relative weakness today. Same idea of “Pillars of the Market” we talked about with SPX the other day, just with a different index (IWM).

It’s all about knowing what factors really move an index and then watching those factors for confluence for a directional play. I made the trade free already and I still have some IWM 209 puts for Wednesday’s expiration. If bond yields drop tomorrow then i’ll exit the puts and maybe even play the bounce, but if yields stay up and things stay weak then I’ll keep riding this trade down with puts.