RUT has reached the upside adjustment point on the August Iron Butterfly.
The RUT August Iron Butterfly has reached the upper adjustment trigger points, with the close at 1441 yesterday. Below are the specifics of the position and recommended adjustment:
Original Position Opened July 17:
- SOLD RUT August 1430 Call, 19.60 credit.
- BOUGHT RUT August 1480 Call, 3.00 debit.
- SOLD RUT August 1430 Put, 20.70 credit.
- BOUGHT RUT August 1380 Put, 7.50 debit.
Order was filled as an "Iron Condor" for $29.80 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT July 1500 Call
Order for extra long call was filled for $1.35.
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: $2,155.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
The guidelines call for the threatened side to be rolled 20 points if RUT moves up or down 10 points from the center of the position or 1440 on the upside. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
BUY RUT July 1430 Call.
SELL RUT July 1480 Call.
SELL RUT July 1450 Call.
BUY RUT July 1500 Call.
The current debit (all four legs) is showing a mid price of 9.50, but that will change depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1450, and the short put at 1430, 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 1440. 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,