Here is the weekend recap of the current position. Our downside adjustment trigger was hit and order executed as per the guidelines.
As of the close Friday, the graph below shows the current (adjusted) position for the April 3 (April monthly) cycle.
SPX April Weekly Iron Butterfly
The guidelines called for 1585 as the downside adjustment trigger point (SPX moving down 10 points from the original center strike of 1595). The adjustment is to roll the put spreads down 20 points:
BUY April 1595 Put
SELL April 1565 Put
SELL April 1575 Put
BUY April 1545 Put
This adjustment was executed for a debit of 6.95 at approximately 10:45 am est. on Friday. The price of SPX at the time of the adjustment was 1583.88.
The current position is:
Call Spreads: -1595/+1625
Put Spreads: -1575/+1545
SPX closed Friday at 1588.85. The position is currently +$82.49, or +2.7% of the maximum margin of$3,000.
Closing order is in for a $6.30 debit, which will be target gain of $150 after commissions.
Additional Adjustment trigger points if necessary:
- Upside if SPX reaches 1595 (short strike): Call spreads will be rolled up 20 points to -1615/+1645
- Downside if SPX reaches 1575 (short strike): Put spreads will be rolled down 20 points to -1555/+1525
Please note once again that it is recommended that you review the article posted on April 6 titled Gaps? Whipsaw? for additional adjustment guidelines for this strategy.
In closing, I want to mention that I have had a couple of inquiries from readers concerning strike selection, specifically the 1595 center versus the 1590 center for this week's trade. The choice of strike is not an exact "science", it is a combination of the trader's time frame for entry, intuition, and somewhat "an art". I heard from one reader who entered the 1590 strike Thursday morning, and exited at 5% target gain on Friday. A difference of 5 points in entry strike can make a difference in the length of time in the trade, but under normal market conditions (gaps excluded), the trade can be managed effectively.
An update on this position will be posted Monday.
As always, stay keen on your risk management and trade carefully,