RUT has reached the upside adjustment point on the May Iron Condor, but some traders may choose to exit rather than adjust again.
The RUT May Iron Butterfly has reached the upper adjustment trigger points. Below are the specifics of the position and recommended adjustment:
Original Position Opened April 18:
- SOLD RUT May 1360 Call, 26.70 credit.
- BOUGHT RUT May 1410 Call, 6.90 debit.
- SOLD RUT May 1360 Put, 29.00 credit.
- BOUGHT RUT May 1310 1240 Put, 13.40 debit.
Order was filled as an "Iron Condor" for $35.40 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT May 1460 Call
Order for extra long call was filled for $1.00.
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: $1,560.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
RUT reached the first adjustment point on April 20, and the position was adjusted as follows:
Upside Adjustment April 20:
BOUGHT RUT May 1360 Call, 35.70 debit.
SOLD RUT May 1410 Call, 9.60 credit.
SOLD RUT May 1380 Call, 23.20 credit.
BOUGHT RUT May 1430 Call, 4.40 debit.
Net debit (all four legs): $7.30
The position summary after the adjustment is as follows:
SHORT May 1380 Call
LONG May 1430 Call
SHORT May 1360 Put
LONG May 1310 Put
LONG May 1460 Call bought at trade entry to cut position delta.
The position is now a 20 point wide Iron Condor.
The guidelines call for the threatened side to be rolled another 20 points if RUT moves beyond either strike, or 1380 on the upside. This morning's rally has caused RUT to gap beyond the adjustment point, so some traders may choose to close the position. For the position we have on, we will proceed and make the second adjustment. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
BUY RUT May 1380 Call.
SELL RUT May 1430 Call.
SELL RUT May 1400 Call.
BUY RUT May 1450 Call.
The current debit (all four legs) is showing a mid price of 8.25, but that will change depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1400, and the short put at 1360, a 40 point wide Iron Condor.
It is recommended to adjust the position before the close today , or some traders may choose to exit the trade. 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,