RUT is nearing the short put strike of 1250 on the July Iron Condor.
The anxiety over the Greek default situation has caused us to have to make two downside adjustments since entering the RUT July monthly position on June 22. A summary of the position and adjustments is below:
- SOLD RUT July 1290 Call, 17.75 credit.
- BOUGHT RUT July 1340 Call, 1.05 debit.
- SOLD RUT July 1290 Put, 16.40 credit.
- BOUGHT July 1240 Put, 4.90 debit.
Order was filled as an "Iron Condor" for $28.20 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT June 1340 Call
Order for extra long call was filled for $1.30.
On Friday, June 25, RUT reached the downside adjustment trigger point of 1280, and the position was adjusted as follows:
Downside Adjustment June 25:
BOUGHT RUT July 1290 Put, 25.10 debit.
SOLD RUT July 1240 Put, 8.00 credit.
SOLD RUT July 1270 Put, 16.10 credit.
BOUGHT July 1220 Put, 5.00 debit.
Net debit (all four legs): $6.00
Yesterday's sell-off caused RUT to reach the second downside adjustment trigger price of 1270, and the position was adjusted once again as follows:
Second downside adjustment June 29:
BOUGHT RUT July 1270 Put, 21.65 debit.
SOLD RUT July 1220 Put, 7.10 credit.
SOLD RUT July 1250 Put, 14.40 credit.
BOUGHT July 1200 Put, 4.40 debit.
Net debit (all four legs): 4.55
The current position is a 40 point wide Iron Condor, with the short put strike at 1250, and the short call at the original 1290 strike. The current position as of this morning is below:
RUT July Iron Condor:
As of this writing, the position is at a loss of ($115), or 2.3% of the capital allocated for the trade ($5,000). Because of the continuing saga over Greece and the fact that the position has already been adjusted twice, I am not recommending a third adjustment. The expiration breakeven as shown on the graph is 1234, so some traders may choose to stay in the position with the "hope" some good news out of Greece may spark a rally.
However, as I wrote yesterday when the second adjustment was made, I do not feel comfortable either 1) adjusting for the third time, or 2) letting the short put strike go "in the money" and risk more of a loss. I am planning to exit the position sometime today if it looks like RUT will close below 1250. Those of you who follow/trade Couch Potato trades will understand my conservative trading style; where I am willing to take a smaller loss rather than risk it turning into a bad situation and continue to put capital into a losing trade.
Fill prices will be posted if the position is closed.
As always, stay keen on your risk management and trade carefully,