It may be necessary to adjust RUT Iron Butterfly again to the upside, depending on market opinion.
RUT continues to march higher in this low-volume Holiday week. As of this writing, RUT is trading at 1214, about 10 points below the upper breakeven. Below are the specifics of the position and suggested adjustment:
Original Position opened December 18:
SOLD RUT January 1180 Call.
BOUGHT RUT January 1230 Call.
SOLD RUT January 1180 Put.
BOUGHT January 1130 Put.
Net Credit (all four legs): $35.15.
BOUGHT RUT January 1260 Call. Debit: $1.70
The original position was adjusted when RUT reached the upside adjustment trigger point of 1190, this was done on December 19.
BOUGHT RUT January 1180 Call.
SOLD RUT January 1230 Call.
SOLD RUT January 1200 Call.
BOUGHT RUT January 1250 Call.
The position is now a 20 point wide Iron Condor, with short call strikes at 1200, and the short put strikes at the original 1180 strike. We also have the extra long call at 1260.
As I look at the one year chart for RUT, I see a triple top on the daily chart at 1213. The bulls attempted to pierce this level on March 4, July 1, and once again this morning. As I mentioned earlier in the week, I am very hesitant to adjust in such a low-volume Holiday week. However, keeping risk management in the forefront of my trading plan, I do feel that a close above this level could bring more fuel to the rally.
RUT One Year Chart:
Depending on market opinion, it is a trader's choice whether to adjust the position today, or wait to see if there is some profit-taking next week. I do feel that if it looks like RUT will close today above 1213, another upside adjustment would be in order. The current position is below:
RUT Current Position:
The guidelines call for the threatened side to be rolled 20 points. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The suggested adjustment is:
BUY RUT January 1200 Call.
SELL RUT January 1250 Call.
SELL RUT January 1220 Call.
BUY RUT January 1270 Call.
The adjusted position would then have the short call strike at 1220, and the short put at the original strike of 1180, a 40 point wide Iron Condor.
For those planning to adjust, it is recommended to wait until later this afternoon to see if RUT pulls back below 1213. Actual fill price for the adjustment will be posted if the adjustment is executed.
As always, stay keen on your risk management and trade carefully,