SPX Weekly Iron Butterfly Entry for March 4 Cycle. This article outlines the recommended entry/exit for the SPX weekly Iron Butterfly for the March 4 cycle (Option Code SPXW130322). This cycle expires Friday, March 22.

With the VIX dropping to its lowest level since 2007, caution is advised to be sure there is an adequate risk/reward when entering this week's trade. When the VIX is at these levels, you get less premium for the options you sell. As mentioned in the last two articles, The optimum risk/reward is obtained with a credit of $15.00 or more.

SPX closed today at 1554.52

SPX 6 month chart

Trade Entry Date: Thursday, March 14

Entry Guidelines:

• Wait at least 45 minutes after market open before entering. Exact entry time is trader's choice.

• Look at economic news for the day; if there is potentially market moving news being announced, do not enter the trade in advance of the news release.

• If the price of SPX moves +/- a one-day, one standard deviation, do not enter the trade. As of today, this is approximately 10 points according to the calculation on my broker's trading platform.



Trade entry details are outlined below with 2 price ranges for entry:


1) If the price of SPX is between 1547.50 - 1552.49 enter the following trade with the Iron Butterfly centered at 1550:


Order Entry: SELL (1) IRON CONDOR.

• SELL 1 contract March4 1550 CALL

• BUY 1 contract March4 1580 CALL

• SELL 1 contract March4 1550 PUT

• BUY 1 contract March4 1520 PUT

CREDIT: At one hour before the close today, credit is $17.20 . This most likely will not be the credit at the open Thursday, however, it can be used as a guideline for entry. Enter at this credit, or higher if available. Entry at a lower credit is acceptable. However, if the credit is lower than $14.00 do not enter the trade.



Position Adjustment Trigger Points (if SPX moves +/- 10 points from center strike):


- Upside adjustment if SPX reaches 1560.

Roll Call spreads 20 points:

Order entry for adjustment: BUY (1) CONDOR using all CALLS.

• BUY 1 contract March4 1550 CALL

• SELL 1 contract March4 1580 CALL

• SELL 1 contract March4 1570 CALL

• BUY 1 contract March4 1600 CALL


- Downside adjustment if SPX reaches 1540.

Roll Put spreads 20 points:

Order entry for adjustment: BUY (1) CONDOR using all PUTS.

• BUY 1 contract March4 1550 PUT

• SELL 1 contract March4 1520 PUT

• SELL 1 contract March4 1530 PUT

• BUY 1 contract March4 1500 PUT



2) If the price of SPX is between 1552.50 - 1557.49 enter the following trade with the Iron Butterfly centered at 1555:


Order Entry: SELL (1) IRON CONDOR.

• SELL 1 contract March4 1555 CALL

• BUY 1 contract March4 1585 CALL

• SELL 1 contract March4 1555 PUT

• BUY 1 contract March4 1525 PUT


CREDIT: At one hour before the close today, credit is $16.20. This most likely will not be the credit at the open Thursday, however, it can be used as a guideline for entry. Enter at this credit, or higher if available. Entry at a lower credit is acceptable. However, if the credit is lower than $14.00 do not enter the trade.



Position Adjustment Trigger Points (if SPX moves +/- 10 points from center strike):


- Upside adjustment if SPX reaches 1565.

Roll Call spreads 20 points:

Order entry for adjustment: BUY (1) CONDOR using all CALLS.

• BUY 1 contract March4 1555 CALL

• SELL 1 contract March4 1585 CALL

• SELL 1 contract March4 1575 CALL

• BUY 1 contract March4 1605 CALL

- Downside adjustment if SPX reaches 1545.

Roll Put spreads 20 points:

Order entry for adjustment: BUY (1) CONDOR using all PUTS.

• BUY 1 contract March4 1555 PUT

• SELL 1 contract March4 1525 PUT

• SELL 1 contract March4 1535 PUT

• BUY 1 contract March4 1505 PUT



Please note: My goal in the above guidelines is to give enough detailed instructions for trade entry within the 2 prices ranges I felt would be most likely for SPX on Thursday. However, the continued runup of SPX this afternoon creates yet a third possible price range and center strike. The following is an additional trade recommendation for entry Thursday.

If the price of SPX is between 1557.50 - 1562.49, the trade can be entered with the center strike at 1560. If the trade is centered at 1560, all other entry and adjustment guidelines should be modified accordingly for the higher strike.



TARGET GAIN AND MAX LOSS TRIGGER POINTS:

Target Gain: 5% of maximum allocated margin ($3,000), or $150.

Maximum Loss: 10% of maximum allocated margin ($3,000), or $300

The total "risk" in the position is the maximum allocated margin.

Trade is exited if either of these gain/loss conditions are met.


A trade update will be posted tomorrow.

Trade carefully,

Dot Hazlin