Another week; another new trade! SPX Weekly Iron Butterfly Entry for May. This is the May/monthly cycle that expires Thursday, May 16.

SPX closed today at 1632.69, another all -time closing high.

SPX 6 month chart

Trade Entry Date: Thursday, May 9

Entry Guidelines:

- Wait at least 45 minutes - 1 hour after market open before entering. Exact entry time is trader's choice. I sometimes wait until towards the end of the day to eliminate the risk of intra-day price movement.

- 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.



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 1627.50 - 1632.49 enter the following trade with the Iron Butterfly centered at 1630:


Order Entry: SELL (1) IRON CONDOR.

SELL 1 contract May 1630 CALL

BUY 1 contract May 1660 CALL

SELL 1 contract May 1630 PUT

BUY 1 contract May 1600 PUT

CREDIT: At the close today, credit is $16.20. This most likely will not be the credit at the time of entry, 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 $14.50 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 1640.

Roll Call spreads 20 points:

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

BUY 1 contract May 1630 CALL

SELL 1 contract May 1660 CALL

SELL 1 contract May 1650 CALL

BUY 1 contract May 1680 CALL


- Downside adjustment if SPX reaches 1620.

Roll Put spreads 20 points:

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

BUY 1 contract May 1630 PUT

SELL 1 contract May 1600 PUT

SELL 1 contract May 1610 PUT

BUY 1 contract May 1580 PUT


1) If the price of SPX is between 1632.50 - 1637.39 enter the following trade with the Iron Butterfly centered at 1635:


Order Entry: SELL (1) IRON CONDOR.

SELL 1 contract May 1635 CALL

BUY 1 contract May 1665 CALL

SELL 1 contract May 1635 PUT

BUY 1 contract May 1605 PUT

CREDIT: At the close today, credit is $15.80. This most likely will not be the credit at the time of entry, 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 $14.50 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 1645.

Roll Call spreads 20 points:

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

BUY 1 contract May 1635 CALL

SELL 1 contract May 1665 CALL

SELL 1 contract May 1655 CALL

BUY 1 contract May 1685 CALL


- Downside adjustment if SPX reaches 1625.

Roll Put spreads 20 points:

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

BUY 1 contract May 1635 PUT

SELL 1 contract May 1605 PUT

SELL 1 contract May 1615 PUT

BUY 1 contract May 1585 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 1637.50 - 1642.49, the trade can be entered with the center strike at 1640. If the trade is centered at 1640, all other entry and adjustment guidelines should be modified accordingly for the higher strike.

DOWNSIDE MOVE: If the price of SPX is between 1622.50 - 1627.49, the trade can be entered with the center strike at 1625. If the trade is centered at 1625, 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.


A trade update will be posted with entry details.

Trade carefully,

Dot Hazlin