RUT April Iron Butterfly has reached the upside adjustment trigger point.
They same timing can be everything...The new trade entered yesterday for the RUT April Iron Butterfly steamed past the upside adjustment trigger the day we entered the position.
A recap of the current position and suggested adjustment follows:
Original Position Opened March 17:
- SOLD RUT April 1070 Call, 21.20 credit.
- BOUGHT RUT April 1120 Call, 3.00 debit..
- SOLD RUT April 1070 Put, 21.50 credit.
- BOUGHT RUT April 1020 Put, 7.70 debit.
Order was filled as an "Iron Condor" for $32.00 net credit (all four legs).
BOUGHT RUT April 1130 Call.
Call order was filled for $1.70 debit
Margin/Risk is calculated by the width of the wings ($5,000), less credit received plus the cost of the long call.
Margin/Risk for this trade: $1,970.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
Below is the position as of the close yesterday:
RUT April Iron Butterfly:
The upside adjustment calls for the threatened side to be rolled 20 points. This can be accomplished in one order, in this case "Buy Condor" - all calls.
Suggested Upside Adjustment:
BUY RUT April 1070 Call
SELL RUT April 1120 Call
SELL RUT April 1090 Call
BUY RUT April 1140Call
As of the close yesterday, the current debit for all four legs is $8.63, but that will change depending on when the adjustment is made. While RUT is already at the new short call strike of 1090, I am recommending the 20 point roll of the calls, and we will evaluate early next week if the rally continues without a pullback.
It is a trader's choice as to when to make the adjustment, but it is recommended to adjust before the end of the day if it appears that RUT will close above 1080.
Exact prices on the fill will be posted when the adjustment is executed.
As always, stay keen on your risk management and trade carefully,