RUT February Iron Butterfly has reached the downside adjustment trigger of 990.
I commented when this position was opened yesterday that I was very cautiously suggesting this monthly trade entry, and recommended either paper trading or sitting on the sidelines. Sure enough, it looks like oil has spooked the market once again. As of this writing, RUT futures are down 18 points, so the position I set up will need to be adjusted today unless there is a serious reversal.
A recap of the current position and suggested adjustment follows:
Original Position Opened January 19:
- SOLD RUT February 1000 call, 31.40 credit.
- BOUGHT RUT February 1050 call, 9.50 debit..
- SOLD RUT February 1000 put, 30.95 credit.
- BOUGHT February 950 put, 15.00 debit.
Order was filled as an "Iron Condor" for $37.85 net credit (all four legs).
BOUGHT RUT February 1110 Call.
Call order was filled for $.95 debit
The guidelines call for the threatened side to be rolled 20 points if it appears that RUT will close below 990. However, given the current market conditions and bearish overtone, I am recommending to roll the put spreads down 30 points rather than 20. This can be accomplished with one order: "BUY Condor"; in this case all Puts. The adjustment will be:
BUY RUT February 1000 Put.
SELL RUT February 950 Put.
SELL RUT February 970 Put.
BUY RUT February 920 Put.
The current debit as of the close is 5.85 for the roll, but that will change depending on when the adjustment is made.
The adjusted position would put the short put strike at 970, and the short call at the original 1000 strike, a 30 point wide Iron Condor.
It is recommended to adjust the position before the close today if it appears that RUT will close below 990. It is a trader's choice as to the timing of the adjustment. Actual fill prices will be posted when the adjustment is executed.
As always, stay keen on your risk management and trade carefully,