RUT has now reached the upside adjustment point on the June Iron Condor.
After having to adjust our June RUT position to the downside last week, we are now at the upper adjustment point. Below are the specifics of the position and recommended adjustment:
Original Position Opened May 16:
- SOLD RUT June 1110 Call, 24.10, credit.
- BOUGHT RUT June 1160 Call, 4.40 debit.
- SOLD RUT June 1110 Put, 22.00 credit.
- BOUGHT RUT June 1060 Put, 7.90 debit.
Order was filled as an "Iron Condor" for $33.80 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT June 1180 Call
Order for extra long call was filled for $1.60.
Margin/Risk is calculated by the width of the wings ($5,000), less credit received, plus the cost of the extra long call.
Margin for this trade at entry: 1,780.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On May 19, RUT reached the downside adjustment trigger and the position adjustment was as follows:
BOUGHT RUT June 1110 Put, 34.50 debit.
SOLD RUT June 1060 Put, 13.70 credit.
SOLD RUT June 1090 Put, 24.40 credit.
BOUGHT June 1040 Put, 9.10 debit.
Net debit (all four legs): $5.50
Since the position has been adjusted once, the guidelines call for the position to be adjusted at either short strike. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
Recommended Upside Adjustment May 23:
BUY RUT May 1110 Call.
SELL RUT May 1160 Call.
SELL RUT May 1130 Call.
BUY RUT April 1180 Call.
The current debit (all four legs) is showing a mid price of 8.28, but that will vary depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1130, and the short put at 1090, a 40 point wide Iron Condor.
It is recommended to adjust the position before the close today if it appears that RUT will close above 1110. 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,