RUT November Iron Butterfly is hovering at the downside adjustment trigger of 1160.
Today's pullback is bringing the November RUT position to the downside adjustment point of 1160.
A recap of the current position and suggested adjustment follows:
Original position opened October 19:
- SOLD RUT November 1170 Call, 21.10 credit.
- BOUGHT RUT November 1220 Call, 2.70 debit.
- SOLD RUT November 1170 Put, 23.45 credit.
- BOUGHT November 1120 Put, 9.20 debit.
Order was filled as an "Iron Condor" for $32.65 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT November 1235 Call
Order for extra long call was filled for $1.05.
Margin/Risk is calculated by the width of the wings ($5,000), less credit received, plus the cost of the extra long call.
Margin/Risk for this trade: $1,840.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
The guidelines call for the threatened side to be rolled 20 points if it appears that RUT will close below 1160. This can be accomplished with one order: "BUY Condor"; in this case all Puts. The adjustment will be:
BUY RUT November 1170 Put.
SELL RUT November 1120 Put.
SELL RUT November 1150 Put.
BUY RUT November 1100 Put.
As of this writing, the net debit (all four legs) for the above adjustment is $4.85, but that will likely change depending on when the adjustment is made.
The adjusted position would put the short put strike at 1150, and the short call at the original 1170 strike, creating a 20 point wide Iron Condor.
It is recommended to adjust the position before the close today if it appears that RUT will close below 1160. Actual fill prices will be posted if the adjustment is executed.
As always, stay keen on your risk management and trade carefully,