RUT has reached the upside adjustment point on the November Iron Butterfly.
The RUT November Iron Butterfly has reached the upper adjustment trigger points. Below are the specifics of the position and recommended adjustment:
Original Position Opened October 17:
- SOLD RUT November 1210 Call, 29.60 credit.
- BOUGHT RUT November 1260 Call, 7.40 debit.
- SOLD RUT November 1210 Put, 26.60 credit.
- BOUGHT RUT November 1160 Put, 12.20 debit.
Order was filled as an "Iron Condor" for $36.60 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT November 1295 Call
Order for extra long call was filled for $1.60.
Margin/Risk is calculated by the width of the wings ($5,000), less credit received, plus the cost of the extra long call.
Margin for this trade at entry: $1,500.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
The guidelines call for the threatened side to be rolled 20 points if RUT moves up or down 10 points from the center of the position or 1220 on the upside. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
BUY RUT November 1210 Call.
SELL RUT November 1260 Call.
SELL RUT November 1230 Call.
BUY RUT November 1280 Call.
The current debit (all four legs) is showing a mid price of 7.65, but that will change depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1230, and the short put at 1210, a 20 point wide Iron Condor.
It is recommended to adjust the position before the close today if it appears that RUT will close above 1220. It is a trader's choice as to when to make the adjustment depending on your market opinion and trading schedule.
Actual fill prices will be posted when the adjustment is executed.
As always, stay keen on your risk management and trade carefully,