RUT January Monthly Iron Butterfly; entry order filled.
Order executed for this new position:
- SOLD RUT January 1150 Call, 22.80 credit.
- BOUGHT RUT January 1200 Call, 4.10 debit.
- SOLD RUT January 1150 Put, 24.00 credit.
- BOUGHT RUT January 1100 Put, 9.10 debit.
Order was filled as an "Iron Condor" for $33.60 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT January1235 Call
Debit for long call: $.95.
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: $1,735.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
Below is the risk graph as shown on my broker's platform:
RUT January Iron Butterfly:
The adjustment trigger points for this position are if RUT moves up or down 10 points from the center of the Iron Butterfly. Adjustment trigger on the call side would be if RUT reaches 1160. Since we have the extra long call, we can be a little patient with the adjustment depending on the position status and overall market conditions. The downside adjustment would be at approximately 1140, depending on market conditions and position status at the time the trigger is reached. As the trade is also a bit more "friendly" on downside moves, we can be patient as well on making the downside adjustment if the trigger is reached. Remember these are guidelines, not concrete rules, and can be modified as a trader chooses depending on market opinion.
For those unfamiliar with the strategy, the trade management guidelines for all the Couch Potato Trader plays were most 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,