RUT April Iron Butterfly is nearing the downside adjustment trigger of 1240.
Today's selloff is bringing the April RUT position near the downside adjustment point of 1240.
A recap of the current position and suggested adjustment follows:
Original Position Entered March 19:
- SOLD RUT April 1250 Calls, 20.70.
- BOUGHT RUT April 1300 Calls, 2.60
- SOLD RUT April 1250 Puts, 19.80
- BOUGHT RUT April 1200 Puts, 7.00
Order was filled as an "Iron Condor" for $30.90 net credit (all four legs).
Additional Order to Cut Negative Deltas on Upside:
- BOUGHT RUT April 1310 Call
Order for extra long call was filled for $1.35.
RUT Upside Adjustment March 20:
BOUGHT RUT April 1250 Call, 26.20 debit.
SOLD RUT April 1300 Call, 2.90 credit.
SOLD RUT April 1270 Call, 13.80 credit.
BOUGHT April 1320 Call, .70 debit.
Net debit (all four legs): $10.20
The current position after the initial adjustment is a 20 point wide Iron Condor, with the short call strike at 1270, and the short put at the original 1250 strike.
The guidelines call for the threatened side to be rolled 20 points if it appears that RUT will close below 1240. This can be accomplished with one order: "BUY Condor"; in this case all Puts. The adjustment will be:
RUT Downside Adjustment:
BUY RUT April 1250 Put.
SELL RUT April 1200 Put.
SELL RUT April 1230 Put.
BUY RUT April 1180 Put.
The adjusted position would put the short call strike at 1270, and the new short put strike at 1230, a 40 point wide Iron Condor.
It is recommended to adjust the position before the close today if it appears that RUT will close below 1240. Actual fill prices will be posted if the adjustment is executed.
As always, stay keen on your risk management and trade carefully,