RUT February Iron Butterfly has now reached the upside adjustment trigger of 1000.
Talk about whipsaw; yesterday was looking like there was no bottom, only to have RUT rebound late in the day. Futures are flat as of this writing, but it's quite probable that RUT will reach the upper short strike of 1000. I am planning to adjust the trade to the upside if that level holds; the adjustment will create a 50 point wide Iron Condor.
A recap of the current position and suggested adjustment follows:
Original Position Opened January 19:
- SOLD RUT February 1000 call, 31.40 credit.
- BOUGHT RUT February 1050 call, 9.50 debit..
- SOLD RUT February 1000 put, 30.95 credit.
- BOUGHT February 950 put, 15.00 debit.
Order was filled as an "Iron Condor" for $37.85 net credit (all four legs).
BOUGHT RUT February 1110 Call.
Call order was filled for $.95 debit
Downside adjustment made January 20:
BOUGHT RUT February 1000 Put, 47.20 debit.
SOLD RUT February 950 Put, 24.20 credit.
SOLD RUT February 970 Put, 32.10 credit.
BOUGHT February 920 Put, 15.90 debit.
Net debit (all four legs): $6.80
The upside adjustment calls for the threatened side to be rolled 20 points. This can be accomplished in one order, in this case "Buy Condor" - all calls.
Suggested Upside Adjustment:
BUY RUT February 1000 Call
SELL RUT February 1050 Call
SELL RUT February 1020 Call
BUY RUT February 1070 Call
As of this writing, the current debit for all four legs is $5.55, but that will change depending on when the adjustment is made.
It is a trader's choice as to when to make the adjustment, but it is recommended to adjust before the end of the day if it appears that RUT will close above 1000.
Exact prices on the fill will be posted when the adjustment is executed.
As always, stay keen on your risk management and trade carefully,