RUT has reached the downside adjustment point on the June Iron Butterfly.
Below are the specifics of the position and recommended adjustment:
Original Position Opened May 16:
- SOLD RUT June 1390 Call, 25.05 credit.
- BOUGHT RUT June 1440 Call, 5.80 debit.
- SOLD RUT June 1390 Put, 21.00 credit.
- BOUGHT RUT June 1340 Put, 7.50 debit.
Order was filled as an "Iron Condor" for $32.75 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT June 1480 Call
Order for extra long call was filled for $1.40.
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: $1,865.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
The guidelines call for the position to be adjusted when RUT moves 10 points from the center of the position. This can be accomplished with one order: "BUY Condor"; in this case all Puts. The adjustment will be:
BUY RUT June 1390 Put.
SELL RUT June 1340 Put.
SELL RUT June 1370 Put.
BUY RUT June 1320 Put.
The current debit (all four legs) is showing a mid price of 5.85, but that will change once the market opens and will vary depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1390, and the short put at 1370, a 20 point wide Iron Condor. After the adjustment, the expiration breakeven on the downside is at 1344.
It is recommended to adjust the position before the close today.
Actual fill prices will be posted when the adjustment is executed.
As always, stay keen on your risk management and trade carefully,