Another week; another new trade! SPX Weekly Iron Butterfly Entry for April 3 Cycle. The April 3 cycle is the regular monthly cycle for April, which expires April 19.

SPX closed today at 1587.72

SPX 6 month chart

Trade Entry Date: Thursday, April 11

I do want to caution everyone that SPX broke through it's all time high this morning quite strongly and continued to move upward throughout the day, closing slightly below the high of the day. If anyone is uncomfortable with this week's trade entry, it is recommended that you sit on the sidelines, or paper trade it, until the next cycle. As I've said before, with the more frequent trades, it is perfectly fine to skip a week and still end up with positive gains for the year.

Entry Guidelines:

- Wait at least 45 minutes - 1 hour after market open before entering. With the large intra-day moves lately, entering the last hour of the day is recommended. 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 11 points according to the calculation on my broker's trading platform.

- Review the article posted April 6 titled Gaps? Whipsaw?. The article contains some very important, additional guidelines for managing this trade.



Trade entry details are outlined below with 2 price ranges for entry as of the close today:



1) If the price of SPX is between 1582.50 - 1587.49 enter the following trade with the Iron Butterfly centered at 1585:


Order Entry: SELL (1) IRON CONDOR.

SELL 1 contract April 1585 CALL

BUY 1 contract April 1615 CALL

SELL 1 contract April 1585 PUT

BUY 1 contract April 1555 PUT

CREDIT: At the close today, credit is $17.05. 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). 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 1595.

Roll Call spreads 20 points:

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

BUY 1 contract April 1585 CALL

SELL 1 contract April 1615 CALL

SELL 1 contract April 1605 CALL

BUY 1 contract April 1635 CALL


- Downside adjustment if SPX reaches 1575.

Roll Put spreads 20 points:

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

BUY 1 contract April 1585 PUT

SELL 1 contract April 1555 PUT

SELL 1 contract April 1565 PUT

BUY 1 contract April 1535 PUT



2) If the price of SPX is between 1587.50 - 1592.49 enter the following trade with the Iron Butterfly centered at 1590:

Order Entry: SELL (1) IRON CONDOR.

SELL 1 contract April 1590 CALL

BUY 1 contract April 1620 CALL

SELL 1 contract April 1590 PUT

BUY 1 contract April 1560 PUT

CREDIT: At the close today, credit is $16.25. 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). 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 1600.

Roll Call spreads 20 points:

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

BUY 1 contract April 1590 CALL

SELL 1 contract April 1620 CALL

SELL 1 contract April 1610 CALL

BUY 1 contract April 1640 CALL


- Downside adjustment if SPX reaches 1580.

Roll Put spreads 20 points:

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

BUY 1 contract April 1590 PUT

SELL 1 contract April 1560 PUT

SELL 1 contract April 1570 PUT

BUY 1 contract April 1540 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 tomorrow. However, if SPX is outside of these two ranges, following are alternate trade recommendations for entry .

UPSIDE MOVE: If the price of SPX is between 1592.50 - 1597.49, the trade can be entered with the center strike at 1595. If the trade is centered at 1595, all other entry and adjustment guidelines should be modified accordingly for the higher strike.

DOWNSIDE MOVE: If the price of SPX is between 1577.50 - 1582.49, the trade can be entered with the center strike at 1580. If the trade is centered at 1580, all other entry and adjustment guidelines should be modified accordingly for the lower strike.



TARGET GAIN AND MAX LOSS TRIGGER POINTS:

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

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

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

Trade is exited if either of these gain/loss conditions are met. It is also recommended to exit the position by Wednesday afternoon, or Thursday morning, at the latest. As expiration draws closer, positions can be more difficult to manage.


A trade update will be posted as the trade progresses.

Trade carefully,

Dot Hazlin