RUT has reached the upside adjustment point on the October Iron Butterfly.
The RUT October Iron Butterfly has reached the upper adjustment trigger points. Below are the specifics of the position and recommended adjustment:
Original Position Opened September 18:
- SOLD RUT October 1440 Call, 19.40 credit.
- BOUGHT RUT October 1490 Call, 2.20 debit.
- SOLD RUT October 1440 Put, 17.20 credit.
- BOUGHT RUT October 1390 Put, 5.70 debit.
Order was filled as an "Iron Condor" for $28.70 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT October 1500 Call
Order for extra long call was filled for $1.25.
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: $2,255.
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 1450 on the upside. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
BUY RUT October 1440 Call.
SELL RUT October 1490 Call.
SELL RUT October 1460 Call.
BUY RUT October 1510 Call.
The current debit (all four legs) is showing a mid price of 10.88, but that will change depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1460, and the short put at 1440, 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 1450. 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,