RUT has reached the upside adjustment point on the July Iron Butterfly.
The RUT July Iron Butterfly has reached the upper adjustment trigger points. Below are the specifics of the position and recommended adjustment:
Original Position Opened June 19:
- SOLD RUT July 1410 Call, 23.30 credit.
- BOUGHT RUT July 1460 Call, 4.20 debit.
- SOLD RUT July 1410 Put, 18.85 credit.
- BOUGHT RUT July 1360 Put, 6.90 debit.
Order was filled as an "Iron Condor" for $31.05 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT July 1480 Call
Order for extra long call was filled for $1.70.
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: $2,065.
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 1420 on the upside. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
BUY RUT July 1410 Call.
SELL RUT July 1460 Call.
SELL RUT July 1430 Call.
BUY RUT July 1480 Call.
The current debit (all four legs) is showing a mid price of 9.30, but that will change depending on when the adjustment is made.
The adjusted position will now put the short call strike at 1430, and the short put at 1410, 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 1420. 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,