The RUT September Iron Butterfly has reached the downside adjustment trigger point. Below are the specifics of the position and recommended adjustment:
Original Position Opened August 14:
- SOLD RUT September 1390 Call, 21.05 credit.
- BOUGHT RUT September 1440 Call, 3.40 debit.
- SOLD RUT September 1390 Put, 26.05 credit.
- BOUGHT RUT September 1340 Put, 10.80 debit.
Order was filled as an "Iron Condor" for $32.90 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT September 1460 Call
Order for extra long call was filled for $1.20.
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: $1,830.
The guidelines call for the position to be adjusted when RUT moves 10 points from the center of the position, or 1380 on the downside. This can be accomplished with one order: "BUY Condor"; in this case all Puts. The adjustment will be:
BUY RUT September 1390 Put.
SELL RUT September 1340 Put.
SELL RUT September 1370 Put.
BUY RUT September 1320 Put.
The current debit (all four legs) is showing a mid price of6.05, 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 put strike at 1370 and the short call at 1390, a 20 point wide Iron Condor.
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,