Another week; another new trade! SPX Weekly Iron Butterfly Entry for March5 Cycle. This article outlines the recommended entry/exit for the SPX weekly Iron Butterfly for the March5 cycle (Option Code SPXQ130328). This cycle expires Thursday, March 28. It is worth noting that the expiration date is one day earlier than the regular weeklys, because it is the quarterly cycle. Because they expire one day earlier, there is one less day to trade the position.

For any new readers who have not yet been introduced to this SPX weekly strategy, it is recommended that you review the last few weeks' articles for the basic guidelines for the SPX weekly Iron Butterfly.

As mentioned previously, The optimum 1:1 risk/reward is obtained with a credit of $15.00 or more. However, since this is the quarterly cycle, it usually results in a lower credit because of the time decay that has already taken place in the quarterly cycle. The VIX is also still very low, closing today at 12.69.

SPX closed today at 1558.71.

SPX 6 month chart

Trade Entry Date: Thursday, March 21

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. Volatility often increases leading up to a news release, which can help you get a better credit by entering soon after the news.

• 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 1552.50 - 1557.49 enter the following trade with the Iron Butterfly centered at 1555:


Order Entry: SELL (1) IRON CONDOR.

• SELL 1 contract March5 1555 CALL

• BUY 1 contract March5 1585 CALL

• SELL 1 contract March5 1555 PUT

• BUY 1 contract March5 1525 PUT


CREDIT: At the close today, credit is $17.00. 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 March5 1555 CALL

• SELL 1 contract March5 1585 CALL

• SELL 1 contract March5 1575 CALL

• BUY 1 contract March5 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 March5 1555 PUT

• SELL 1 contract March5 1525 PUT

• SELL 1 contract March5 1535 PUT

• BUY 1 contract March5 1505 PUT



2) If the price of SPX is between 1557.50 - 1562.49 enter the following trade with the Iron Butterfly centered at 1560:


Order Entry: SELL (1) IRON CONDOR.

• SELL 1 contract March5 1560 CALL

• BUY 1 contract March5 1590 CALL

• SELL 1 contract March5 1560 PUT

• BUY 1 contract March5 1530 PUT


CREDIT: At the close today, credit is $16.10. 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 1570.

Roll Call spreads 20 points:

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

• BUY 1 contract March5 1560 CALL

• SELL 1 contract March5 1590 CALL

• SELL 1 contract March5 1580 CALL

• BUY 1 contract March5 1610 CALL


- Downside adjustment if SPX reaches 1550.

Roll Put spreads 20 points:

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

• BUY 1 contract March5 1560 PUT

• SELL 1 contract March5 1530 PUT

• SELL 1 contract March5 1540 PUT

• BUY 1 contract March5 1510 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 likely for SPX on Thursday. However, with the wide intra-day price swings lately, the following are alternate trade recommendations for entry Thursday.

UPSIDE MOVE: If the price of SPX is between 1562.50 - 1567.49, the trade can be entered with the center strike at 1565. If the trade is centered at 1565, all other entry and adjustment guidelines should be modified accordingly for the higher strike.

DOWNSIDE MOVE: If the price of SPX is between 1542.50 - 1547.49, the trade can be entered with the center strike at 1545. If the trade is centered at 1545, all other entry and adjustment guidelines should be modified accordingly for the lower 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