RUT April Iron Butterfly Adjusted to Downside Again.
Further to my earlier post, the RUT April position was adjusted to the downside for the second time. The adjustment made was to roll the put spreads down 20 points, details are:
BOUGHT RUT April 1230 Put, 20.30 debit.
SOLD RUT April 1180 Put, 6.60 credit.
SOLD RUT April 1210 Put, 13.00 credit.
BOUGHT April 1160 Put, 4.00 debit.
Net debit (all four legs): $4.70
The graph of the adjusted position is below:
RUT April Iron Butterfly after second downside adjustment:
The position summary after the adjustment is as follows:
SHORT April 1270 Call
LONG April 1320 Call
SHORT April 1210 Put
LONG April 1160 Put
The position is now a 60 point wide Iron Condor.
As I wrote earlier, it is a trader's choice whether to make this second adjustment, or to exit the trade. The decision was made to keep our trade open and share the progress, but some may feel more comfortable exiting for a manageable loss and moving on to the next trade. Also, for those who do adjust the position, the guidelines state that the opposite side may be rolled down for a credit. I do not plan to take that course of action; I prefer to keep the position as a wide Iron Condor and minimize the "whipsaw" effect if RUT reverses back to the upside.
There are no further adjustments planned for this trade; the trade will remain open as long as RUT stays between the short strikes, and does not reach the pre-set max loss. When I see that the trade becomes profitable, it will likely be closed for less than the original target gain.
The trade guidelines were most recently published on October 22, 2014, and can be found here: Link to Articles
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,