Are you looking for a monthly trade? Wednesday is our entry day for the RUT Iron Butterfly for June.

RUT closed today at 998.78

RUT 6 month chart

Trade Entry Date: Wednesday, May 22, 30 days prior to June expiration.

Entry Guidelines:

-There is a fair amount of economic news being announced Wednesday; the most noteworthy being the FOMC minutes being released at 2 pm EST. It is recommended to wait until after minutes are released, and the market settles, before entering the trade. I will likely wait until the last hour of the day to enter.

- If the price of RUT 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 8 points according to the calculation on my broker's trading platform.

- Enter even strikes only. Even strikes tend to have higher open interest than the odd strikes. Additionally, sometimes the odd strikes are not available when you have to adjust.

- Review the article posted on April 2, 2013 Titled "Are You Looking for a Monthly Trade? with the basic trade guidelines. Link to Articles



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



1) If the price of RUT is between 985.00 - 994.99 enter the following trade with the Iron Butterfly centered at 990:


Order Entry: SELL (1) IRON CONDOR.

SELL 1 contract June 990 CALL

BUY 1 contract June 1040 CALL

SELL 1 contract June 990 PUT

BUY 1 contract June 940 PUT

CREDIT: Credit for this position will vary depending on time of entry, volatility, price of the underlying, etc. Over the last several months, credits have ranged from $27.00 - $33.00.



Position Adjustment Trigger Points (if RUT 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 RUT 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. My personal preference is to wait until the end of the day whenever possible.


- Upside adjustment if RUT reaches 1000.

Roll Call spreads 20 points:

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

BUY 1 contract June 990 CALL

SELL 1 contract June 1040 CALL

SELL 1 contract June 1010 CALL

BUY 1 contract June 1060 CALL


- Downside adjustment if RUT reaches 980.

Roll Put spreads 20 points:

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

BUY 1 contract June 990 PUT

SELL 1 contract June 940 PUT

SELL 1 contract June 970 PUT

BUY 1 contract June 920 PUT



2) If the price of RUT is between 995 - 1004.99 enter the following trade with the Iron Butterfly centered at 1000:

Order Entry: SELL (1) IRON CONDOR.

SELL 1 contract June 1000 CALL

BUY 1 contract June 1050 CALL

SELL 1 contract June 1000 PUT

BUY 1 contract June 950 PUT

CREDIT: Credit for this position will vary depending on time of entry, volatility, price of the underlying, etc. Over the last several months, credits have ranged from $27.00 - $33.00



Position Adjustment Trigger Points (if RUT 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 RUT 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.


- Upside adjustment if RUT reaches 1010.

Roll Call spreads 20 points:

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

BUY 1 contract June 1000 CALL

SELL 1 contract June 1050 CALL

SELL 1 contract June 1020 CALL

BUY 1 contract June 1070 CALL


- Downside adjustment if RUT reaches 990.

Roll Put spreads 20 points:

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

BUY 1 contract June 1000 PUT

SELL 1 contract June 950 PUT

SELL 1 contract June 980 PUT

BUY 1 contract June 930 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 RUT. However, if RUT is outside of these two price ranges, it will have moved +/- a one day standard deviation. As per the guidelines, do not enter the trade unless RUT settles back to less than a one day standard deviation. There is always the next day to enter the trade.



TARGET GAIN AND MAX LOSS TRIGGER POINTS:

Target Gain: $250, which is 5% of maximum allocated margin ($5,000).

Maximum Loss: $500, which is 10% of maximum allocated margin ($5,000).

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 tomorrow.

Trade carefully,

Dot Hazlin