RUT February Iron Butterfly Adjusted at the Close
I want to apologize that I could not post the adjustment details prior to the close yesterday. I had some intermittent internet/power outages during the day yesterday that prevented me from accessing our web site.
As per the trade guidelines, the trigger to consider an adjustment is if RUT moves up or down 10 points from the center of the Iron Butterfly. Yesterday RUT reached our upper adjustment point of 1180. The extra 1270 long call purchased at the trade entry helped the T +0 line smooth, but just before the close an order to adjust the position was submitted.
A recap of the adjustment is below:
SOLD RUT February 1170 Call.
BOUGHT RUT February 1220 Call.
SOLD RUT February 1170 Put.
BOUGHT February 1120 Put.
Net Credit (all four legs): 36.50
BOUGHT February 1270 call (to cut deltas): $.90 Debit
The guidelines call for the threatened side to be rolled 20 points. This was accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment order was:
BUY RUT February 1170 Call.
SELL RUT February 1220 Call.
SELL RUT February 1190 Call.
BUY RUT February 1240 Call.
Net Debit (all four legs): $7.40
The adjusted position now has the short call strike at 1190, and the short put at the original strike of 1170.
The risk graph of the adjusted position is below:
RUT February Iron Condor
RUT closed yesterday at 1190, and is knocking at the door of the next adjustment trigger. If RUT appears to be closing above 1190 today, it may be necessary to adjust the position again, depending on your market opinion. If the second adjustment is made, the guidelines will be followed and the call spreads will be rolled up 20 more points, creating a 40 point wide Iron Condor.
As always, stay keen on your risk management and trade carefully,