Recommended trade entry for Monday, January 19 - Consider Paper Trade or Smaller Size.

Expiration Date: February 19

To say the first two trading weeks of 2016 has been a wild ride is putting it mildly; parabolic is more like it. In my weekend update I wrote that I felt this was a very dangerous time to be in the markets for short term trades such as the weekly SPX Iron Condor. We will venture back in to this play when I feel it is a better market environment.

Having said that, because we are on the sidelines temporarily for the weekly trade, I am setting up the RUT February Iron Butterfly trade entry. As the headline states, I am suggesting that those trading this position either consider placing it in a much smaller size than usual, or trading with Paper Money rather than live capital. I will set up the position and manage it as per the guidelines.

Suggested Trade Entry:

- SELL RUT February 1000 Call, 31.40 credit.

- BUY RUT February 1050 Call, 9.50 debit.

- SELL RUT February 1000 Put, 31.10 credit.

- BUY RUT February 950 Put, 15.00 debit.

It is recommended to place the order as a single entry: SELL " Iron Condor".

Current mid price for all four legs: $38.00. We recommend trying to get filled for the mid, or slightly below.

Additional Order to Cut Negative Deltas on Upside:

- BUY RUT February 1110 Call

Current mid price: $1.05

Note that the 1110 long call is based on a one-contract position. The exact strike of the extra long call will vary, depending on the size of the position. If the long call is purchased, the goal to cut the position deltas in 1/2 to 3/4 at entry. As of this writing, the 1110 long call cuts the position deltas from -6 to -2 based on the one-contract example.

The extra long call will keep the T +0 line a bit flatter on the upside. The Iron Butterfly is negative-delta by nature so will get hurt more quickly with a move up rather than down. However, it is a trader's choice whether to add the extra long call; depending on your market bias.

Note that because this is a 50-point wide Iron Butterfly, the gross margin requirements in a Reg-T account is $5,000 per contract. Your broker will deduct this amount, less actual credit received, from your account, plus the cost of the long call, when the orders fill.

Update will be posted with exact position details when the order is filled.

For those unfamiliar with the strategy, the trade management guidelines were updated on August 20, 2015, and can be found here: Link to Articles

It is recommended that the guidelines be fully understood before entering the position, or paper trade until you are comfortable with the strategy.

Trade updates will be posted as appropriate.

As always, stay keen on your risk management and trade carefully,

Dot Hazlin