Another week; another new trade! SPX Weekly Iron Butterfly Entry for April 1 Cycle.

Before I show the new weekly SPX trade recommendations, I would like to share some thoughts with you.

My goal with this newsletter is to help you become more successful as a trader, so your feedback is important to me. I mentioned in an earlier article that weekly trades may not be suited to everyone's trading style, or lifestyle. While the frequency of weekly trades allows for more opportunities for gains over the course of the year, they can require more maintenance than monthly trades when the market is moving quickly.

Over the next few weeks I will be introducing a monthly Iron Butterfly trade on the RUT that has had consistent, positive results over the last year. 2012 trades resulted in an average gain of 4.35% per month, based on maximum allocated margin ($5,000). While it is a monthly trade, the length of time in the position ranged from 2 - 16 days. The average time in the position for last year was 9 days. The trade is entered 30 - 31 days to expiration, so the next entry date for the May cycle will be April 16 - 17. Are you interested in learning/following this trade? I'd welcome your thoughts, so please send me an email.

Now, let's move on to the new weekly trade. Below is the recommended entry/exit for the SPX weekly Iron Butterfly for the April 1 cycle (Option Code SPXW130405). This cycle expires Friday, April 5.

If this is the first time you have been introduced to the SPX weekly strategy, it is recommended that you review the last few weeks' articles for the basic guidelines for the SPX weekly Iron Butterfly entry and exit.

SPX closed today at 1562.85

SPX 6 month chart

Trade Entry Date: Thursday, March 28

Entry Guidelines:

- Wait at least 45 minutes - 1 hour 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 until the movement is less than a one-day, one standard deviation. 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:



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 April 1 1560 CALL

BUY 1 contract April 1 1590 CALL

SELL 1 contract April 1 1560 PUT

BUY 1 contract April 1 1530 PUT


CREDIT: At the close today, credit is $16.85. 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 $15.00 do not enter the trade.



Position Adjustment Trigger Points (if SPX moves +/- 10 points from center strike). Note: Try to wait 45 minutes - 1 hour after market opens before making any adjustments. Watch key levels of support or resistance before adjusting. If SPX is at, or hovering around, support and resistance levels, it may be prudent to wait a bit longer to adjust. Many times the first hour's price movement is not reliable. This is something that you will get a better sense for as you learn this trade. Remember, trading is "an art and not a science."


- Upside adjustment if SPX reaches 1570.

Roll Call spreads 20 points:

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

BUY 1 contract April 1 1560 CALL

SELL 1 contract April 1 1590 CALL

SELL 1 contract April 1 1580 CALL

BUY 1 contract April 1 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 April 1 1560 PUT

SELL 1 contract April 1 1530 PUT

SELL 1 contract April 1 1540 PUT

BUY 1 contract April 1 1510 PUT



1) If the price of SPX is between 1562.50 - 1567.49 enter the following trade with the Iron Butterfly centered at 1565:


Order Entry: SELL (1) IRON CONDOR.

SELL 1 contract April 1 1565 CALL

BUY 1 contract April 1 1595 CALL

SELL 1 contract April 1 1565 PUT

BUY 1 contract April 1 1535 PUT

CREDIT: At the close today, credit is $16.00 . 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 $15.00 do not enter the trade.



Position Adjustment Trigger Points (if SPX moves +/- 10 points from center strike). Note: Try to wait 45 minutes - 1 hour after market opens before making any adjustments. Watch key levels of support or resistance before adjusting. If SPX is at, or hovering around, support and resistance levels, it may be prudent to wait a bit longer to adjust. Many times the first hour's price movement is not reliable. This is something that you will get a better sense for as you learn this trade. Remember, trading is "an art and not a science."


- Upside adjustment if SPX reaches 1575.

Roll Call spreads 20 points:

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

BUY 1 contract April 1 1565 CALL

SELL 1 contract April 1 1595 CALL

SELL 1 contract April 1 1585 CALL

BUY 1 contract April 1 1615 CALL


- Downside adjustment if SPX reaches 1555.

Roll Put spreads 20 points:

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

BUY 1 contract April 1 1565 PUT

SELL 1 contract April 1 1535 PUT

SELL 1 contract April 1 1545 PUT

BUY 1 contract April 1 1515 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 1567.50 - 1572.49, the trade can be entered with the center strike at 1570. If the trade is centered at 1570, all other entry and adjustment guidelines should be modified accordingly for the higher strike.

DOWNSIDE MOVE: If the price of SPX is between 1552.50 - 1557.49, the trade can be entered with the center strike at 1555. If the trade is centered at 1555, 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

Your 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