Recommended trade entry for Thursday, March 17
Expiration Date: April 15
Suggested Trade Entry:
- SELL RUT April 1070 Call, 21.20 credit.
- BUY RUT April 1120 Call, 3.00 debit.
- SELL RUT April 1070 Put, 21.60 credit.
- BUY RUT April 1020 Put, 7.70 debit.
It is recommended to place the order as a single entry: SELL " Iron Condor".
Current mid price as of this writing for all four legs: $32.10. We recommend trying to get filled for the mid, or slightly below. Mid prices change frequently; it is likely one trader may get a different fill than another.
Additional Order to Cut Negative Deltas on Upside:
- BUY RUT April 1130 Call
Current mid price: $1.60
Note that the 1130 long call is based on a one-contract position. The exact strike of the extra long call will vary, depending on the size of the position. If the long call is purchased, the goal to cut the position deltas in 1/2 to 3/4 at entry. As of this writing, the 1130 long call cuts the position deltas from -9 to -2 based on the one-contract example.
The extra long call will keep the T +0 line a bit flatter on the upside. The Iron Butterfly is negative-delta by nature so will get hurt more quickly with a move up rather than down. However, it is a trader's choice whether to add the extra long call; depending on your market bias.
Note that because this is a 50-point wide Iron Butterfly, the gross margin requirements in a Reg-T account is $5,000 per contract. Your broker will deduct this amount, less actual credit received, from your account, plus the cost of the long call, when the orders fill.
Update will be posted with exact position details when the order is filled.
It is recommended that the guidelines be fully understood before entering the position, or paper trade until you are comfortable with the strategy.
The guidelines for all of the Couch Potato Trader strategies was 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,