Plan for RUT January Iron Condor if RUT continues to move up.
The next upside adjustment on RUT is a close above 1220. A summary of the position and suggested adjustment is below:
A summary of the monthly RUT position opened Thursday, December 18:
SOLD RUT January 1180 Call.
BOUGHT RUT January 1230 Call.
SOLD RUT January 1180 Put.
BOUGHT January 1130 Put.
Net Credit (all four legs): $35.15.
BOUGHT RUT January 1260 Call. Debit: $1.70
The trade guidelines call for the position to be adjusted with a 10 point move from the center strike in either direction. With RUT at approximately 1193, the position as adjusted on December 19 as follows:
Adjustment #1 December 19:
BUY RUT January 1180 Call.
SELL RUT January 1230 Call.
SELL RUT January 1200 Call.
BUY RUT January 1250 Call.
Net Debit (all four legs): $7.95.
After this initial adjustment, the position had short strikes at 1200 and 1180, converting it from an ATM Iron Butterfly to a 20-point wide Iron Condor.
On December 26, RUT moved above the next adjustment trigger point, and the call spreads were rolled another 20 points towards the close of the day. Adjustment order summary is below:
Adjustment #2 December 26:
BUY RUT January 1200 Call.
SELL RUT January 1250 Call.
SELL RUT January 1220 Call.
BUY RUT January 1270 Call.
Net Debit (all four legs): $9.75
The adjusted position now has the short call strike at 1220. The short put is at the original strike of 1180, so we now have a 40 point wide Iron Condor. The current position is below:
RUT January Iron Condor:
The guidelines call for the threatened side to be rolled once again at either short strike. If RUT appears to be closing above 1220, it is suggested to roll the call spreads 20 points. We are once again in a low volume, Holiday-shortened trading week, so I will be cautious to not adjust prematurely. We still have the extra long call at 1260 which will continue to help if RUT marches higher. I would rather wait to see if the New Year brings a correction off of these all-time highs, so will keep a close eye on the position status this week.
In order to keep enough credit in the trade to reach target, if these call spreads are rolled, it is also suggested to roll the non-threatened side (put spreads) up 20 points. A recap of these adjustment orders is outlined below:
Suggested Adjustment #3:
1) Roll Call Spreads 20 points:
BUY RUT January 1220 Call.
SELL RUT January 1270 Call.
SELL RUT January 1240 Call.
BUY RUT January 1290 Call.
Rolling call spreads will be a net debit for all four legs. Debit will vary depending on when the order is submitted.
2) Roll Put Spreads 20 points:
BUY RUT January 1180 Put.
SELL RUT January 1130 Put.
SELL RUT January 1200 Put.
BUY RUT January 1150 Put.
Rolling put spreads will be a net credit for all four legs. As with the call spreads, the actual credit will vary depending on when the order is submitted.
If this adjustment is made, the short strikes will be at 1240 for the calls, and 1200 for the put. The position will still be a 40 point wide Iron Condor.
The trade guidelines were most recently published on October 22, and can be found here: Link to Articles
Details will be posted if the adjustments are made.
As always, stay keen on your risk management and trade carefully,