The bulls remain in charge; SPX reached our upside adjustment trigger point today.
At approximately 12:30 pm est. this morning, SPX broke above our upside adjustment trigger price of 1595, the point at which our guidelines call for a 20 point roll of the call spreads.
The adjustment order was:
BUY May 1 1585 Call
SELL May 1 1615 Call
SELL May 1 1605 Call
BUY May 1 1635 Call
The debit for the adjustment was $10.10.
SPX May 1 Iron Butterfly after adjustment
The adjusted position is now:
Puts: -1585/+1555 (Original put spreads)
SPX closed today at 1593.60, slightly below our adjustment point of 1595. However, we can only trade by the guidelines that are established for any strategy, so making the adjustment when the trigger was hit was a sound trade management decision. SPX could just as easily move back up in the morning as down, so we will just "trade the trade". With short strikes now at 1585 and 1605, the position is fairly well centered on the risk graph.
Our next adjustment trigger points are now the short strikes:
UPSIDE at 1605: Roll call spreads up 20 points resulting in a debit.
DOWNSIDE at 1585: Roll put spreads down 20 points for a debit.
A summary of the new closing order for our target is:
- Original position 15.70 Credit
- Call Roll 10.10 Debit
- Closing Order 4.00 Debit
- This will gross 1.60 gain, less commissions to net 1.50 or $150.
Given that this is a weekly position that has been adjusted, it may be a trader's choice to exit the position for less than the target gain. The FOMC meeting begins tomorrow, with an announcement on Wednesday afternoon. I sometimes will exit positions early prior to such a releases, even if target gain has not been reached. Remember that there are many opportunities to trade weeklys throughout the year, so a gain less than target still adds up towards your annual goal.
An update will be posted as the week progresses.