RUT September Iron Butterfly Adjusted to Downside.
Because of the severity of this morning's downdraft, I felt it best to move forward with the downside adjustment on the September position rather than wait until this afternoon. The downside adjustment for the September position filled for 5.20. Adjustment details are:
BOUGHT RUT September 1210 Put, 37.20 debit.
SOLD RUT September 1160 Put, 16.10 credit.
SOLD RUT September 1190 Put, 26.90 credit.
BOUGHT September 1140 Put, 11.00 debit.
Net debit (all four legs): $5.20
The graph of the adjusted position is below:
RUT September Iron Butterfly after downside adjustment:
The position summary after the adjustment is as follows:
SHORT RUT September 1210 Call
LONG RUT September 1260 Call
SHORT RUT September 1190 Put
LONG RUT September 1140 Put
LONG RUT September 1280 Call (Bought at trade opening to smooth deltas)
The position is now a 20 point wide Iron Condor.
The guidelines state that the next adjustment trigger point will be at either short strike. However, in looking at this current/adjusted position, the expiration breakeven on the downside is 1162.74 so I am giving the trade a bit of leeway before making a third adjustment. If RUT breaks below 1180, the position will be evaluated to see if a third adjustment is warranted, or if it's a better risk management decision to exit the position and move on.
The trade guidelines for all the Couch Potato Trader plays were recently published on August 20, 2015, and can be found here: Link to Articles
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,