RUT September Iron Butterfly may be heading for the downside adjustment trigger point of 1200.
From the look of futures this morning, unless we see a bounce it appears that RUT will be at the downside adjustment trigger point.
A recap of the current position and suggested adjustment follows:
Original Position opened August 17:
- SOLD RUT September 1210 Call, 23.50 credit.
- BOUGHT RUT September 1260 Call, 4.30 debit.
- SOLD RUT September 1210 Put, 24.40 credit.
- BOUGHT September 1160 Put, 9.50 debit.
Order was filled as an "Iron Condor" for $34.10 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT September 1280 Call
Order for extra long call was filled for $1.45.
The guidelines call for the threatened side to be rolled 20 points if it appears that RUT will close below 1200. This can be accomplished with one order: "BUY Condor"; in this case all Puts. The adjustment will be:
BUY RUT September 1210 Put.
SELL RUT September 1160 Put.
SELL RUT September 1190 Put.
BUY RUT September 1140 Put.
This adjustment would put the short put strike at 1190, and the short call at the original 1210 strike. The resulting position will be a 20 point wide Iron Condor.
It is recommended to adjust the position before the close today if it appears that RUT will close below 1200. It is a trader's choice as to when to make the adjustment, depending on one's trading schedule and market opinion. Actual fill prices will be posted if the adjustment is executed.
As always, stay keen on your risk management and trade carefully,