RUT is at the second upside adjustment point on the December Iron Condor.
The RUT December Iron Condor has reached the second upper adjustment trigger point. Below are the specifics of the position and recommended adjustment:
Original position opened Tuesday, November 15:
- SOLD RUT December 1290 Call, 28.80 credit.
- BOUGHT RUT December 1340 Call, 8.10 debit.
- SOLD RUT December 1290 Put, 25.10 credit.
- BOUGHT RUT December 1240 Put, 10.20 debit.
Order was filled as an "Iron Condor" for $35.60 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT December 1380 Call
Order for extra long call was filled for $1.70.
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: $1,610.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On Thursday, November 17, RUT reached the upper adjustment trigger and the position was adjusted as follows:
Upside Adjustment November 17
BOUGHT RUT December 1290 Call, 40.60 debit.
SOLD RUT December 1340 Call, 12.80 credit.
SOLD RUT December 1310 Call, 28.10 credit.
BOUGHT RUT December 1360 Call, 6.80 debit.
Net debit (all four legs): $6.50
Below is the risk graph as of the close yesterday:
RUT December Iron Condor:
After the first adjustment, the guidelines call for the position to be adjusted if RUT reaches either short strike. As I wrote in the Weekend Update, since the upper expiration breakeven is at 1337, I would try to hold off making a second adjustment unless RUT reaches the 1320 - 1325 area.
RUT closed yesterday at 1322, and from the look of futures this morning it looks like it will continue to march higher. With RUT trading at these record-high levels, a pullback could very likely happen at any time. However, since we are in the bullish (Santa Claus rally) season, I am planning to adjust the position as follows:
The adjustment will be:
BUY RUT December 1310 Call.
SELL RUT December 1360 Call.
SELL RUT December 1330 Call.
BUY RUT December 1380 Call.
The current debit (all four legs) is showing a mid price of 7.60, but that will change depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1330, and the short put at 1290, 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 1325. 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,