RUT September Position: Adjust again or close?
Yesterday's selloff caused RUT to reach the second downside adjustment decision point.
Yesterday's decline accelerated into the close, and the September RUT position broke below the second downside adjustment trigger point of 1180. As of this writing, futures appear to be recovering a bit, but it is beyond my crystal ball to say where the day will go. After reviewing the current position, I see two possible courses of action on the position. IF RUT recovers today and remains above 1170, I am planning to adjust the position once again. However, if the decline continues and RUT breaks below 1170, I am recommending the position be closed.
A recap of the current position and suggested adjustment follows:
- 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.
On Thursday, August 20, the selloff brought the position to the downside adjustment trigger, and was adjusted as follows:
BOUGHT RUT September 1210 Put, 37.20 debit.
SOLD RUT September 1160 Put, 16.10 credit.
SOLD RUT September 1190 Put, 26.90 credit.
BOUGHT September 1140 Put, 11.00 debit.
Net debit (all four legs): $5.20
The position summary after the adjustment is as follows:
SHORT RUT September 1210 Call
LONG RUT September 1260 Call
SHORT RUT September 1190 Put
LONG RUT September 1140 Put
LONG RUT September 1280 Call (Bought at trade opening to smooth deltas)
The position is now a 20 point wide Iron Condor. The risk graph as of the close yesterday is below:
RUT September Iron Condor
Downside Adjustment Recommendation #2:
IF RUT remains above 1170 the following is recommended:
BUY RUT September 1190 Put.
SELL RUT September 1140 Put.
SELL RUT September 1170 Put.
BUY RUT September 1120 Put.
This adjustment would put the short put strike at 1170, and the short call at the original 1210 strike. The resulting position will be a 40 point wide Iron Condor.
The alternative course of action is to exit the position IF RUT continues to sell off today. It is recommended to exit the position if RUT breaks below 1170.
Actual fill prices will be posted accordingly.
As always, stay keen on your risk management and trade carefully,