RUT has reached the upside adjustment point on the February Iron Butterfly.
The RUT February Iron Butterfly has reached the upper adjustment trigger points. Below are the specifics of the position and recommended adjustment:
Original Position Opened January 16:
- SOLD RUT February 1590 Call, 22.95 credit.
- BOUGHT RUT February 1640 Call, 6.10 debit.
- SOLD RUT February 1590 Put, 24.30 credit.
- BOUGHT RUT February 1540 Put, 9.00 debit.
Order was filled as an "Iron Condor" for $32.15 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT February 1730 Call
Order for extra long call was filled for $.80
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 threatened side to be rolled 20 points if RUT moves up or down 10 points from the center of the position or 1600 on the upside. This can be accomplished with one order: "BUY Condor"; in this case all Calls. The adjustment will be:
BUY RUT February 1590 Call.
SELL RUT February 1640 Call.
SELL RUT February 1610 Call.
BUY RUT February 1660 Call.
The current debit (all four legs) is showing a mid price of 8.05, but that will change depending on when the adjustment is made.
The adjusted position will put the short call strike at 1610, and the short put at 1590, 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 1600. 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 later in the day when the adjustment is executed.
As always, stay keen on your risk management and trade carefully,