Is this the beginning of the market correction? It may be too early to bet on that, but today's move caused both stop loss orders to trigger on our RUT and SPX open positions.
As of the time of this writing, (3:00 pm est), SPX was down over 20 points to 1610.38, and RUT down over 12 points to 969.59. As per our trade guidelines, stop limit orders were set up and entered to close these positions if the planned max loss was reached (100% of the credit received). These orders triggered late this morning which resulted in both positions being closed. Having my exit orders in place removed much of the emotions that go along with closing a trade that has gone against me, and something I always recommend. Setup of these orders can vary from broker to broker.
Friday morning is the release of the monthly Non Farms Payroll report before the open, so I am not recommending any new positions for entry Thursday. When, and if, the market settles to within our guidelines for trade entry, I will enter both SPX and RUT credit spreads for next week's cycle (expiring June 14). If things appear to be too volatile to take on the weekend risk, I will not enter any new positions until Monday. It may be wise to hold off a week and keep cash as our position, always a good position!
If this downward trend that we've seen in the last few days continues, we may take the opposite stance on the credit spread trade, i.e. selling call spreads rather than put spreads, using the same guidelines.
For those of you who have been trading or following the weekly SPX Iron Butterfly, I am not recommending this to be traded as a live position right now. The current market conditions and large intra-day movements are not favorable for this strategy. I will continue to paper trade the weekly Iron Butterfly on SPX, and it will be re-incorporated into our live trading plan when appropriate.
Trade updates will be posted later in the week.
As always, stay keen on your risk management and trade carefully.