The bulls remain in place; RUT reached our upside adjustment trigger point and adjusted as per the guidelines.
At approximately 10:45 est. Wednesday morning, RUT broke above our upside adjustment trigger price of 930. As I mentioned in the trade entry recommendations, I usually try to wait until the end of the day to adjust, especially with a monthly trade. This always depends on the p/l of the position at the time it reaches the adjustment point, and how quickly the market is moving. Making adjustments is an integral element of non-directional trading. However, I am always cautious about adjusting prematurely and being caught in the classic "whipsaw".
This morning's move up and the continue to trend upward signaled an adjustment was needed at that time. I felt it was prudent to make the adjustment instead of waiting later in the day. At 10:45 am est with RUT at 930.50, the call spreads were rolled up 20 points. The adjustment order was:
BUY May 920 Call
SELL May 970 Call
SELL May 940 Call
BUY May 990 Call
This resulted in a debit. The debit for the adjustment was $10.50.
Below is a graph of our current position:
RUT May Iron Butterfly after adjustment
The adjusted position is now:
The position is currently -$289, down approximately 5.7% of the maximum allocated margin ($5000). With 22 days left in the May cycle before expiration, the trade is now perfectly centered once again and we look for theta to work in our favor.
Our next adjustment trigger points are:
UPSIDE at 940: Roll put spreads up 20 points resulting in a credit:
BUY May 920 Put
SELL May 870 Put
SELL May 940 Put
BUY May 890 Put
DOWNSIDE at 920: Roll call spreads down 20 points for a credit.
BUY May 940 Call
SELL May 990 Call
SELL May 920 Call
BUY May 870 Call
An update will be posted if further action is taken on the position.