It may be necessary to adjust RUT May Iron Butterfly.
RUT continues to march higher; from the look of futures this morning it appears that the May Iron Butterfly will be at the upside adjustment point today. Below are the specifics of the position and recommended adjustment:
Original Position Opened April 18:
- SOLD RUT May 1130 Call, 23.30, credit.
- BOUGHT RUT May 1180 Call, 3.60 debit.
- SOLD RUT May 1130 Put, 19.70 credit.
- BOUGHT RUT May 1080 Put, 7.10 debit.
Order was filled as an "Iron Condor" for $32.30 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT May 1200 Call
Order for extra long call was filled for $1.30.
The guidelines call for the threatened side to be rolled 20 points once RUT moves 10 points from the center of the position. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
BUY RUT May 1130 Call.
SELL RUT May 1180 Call.
SELL RUT May 1150 Call.
BUY RUT April 1200 Call.
The current debit (all four legs) is showing a mid price of 8.75, but that will change once the market opens and will vary depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1150, and the short put at the original strike of 1130, a 20 point wide Iron Condor.
It is recommended to adjust the position before the close today if it appears that RUT will close above 1140. It is a trader's choice as to when to make the adjustment depending on your market opinion and trading schedule.
Actual fill prices will be posted when the adjustment is executed.
As always, stay keen on your risk management and trade carefully,