RUT 15JAN Scaling Income Butterfly

[IgorKeymaster]

RUT at 1732

I’m going to enter a new Scaling Income Butterfly with 63 days until expiration.

I will start by placing a 70X60 broken wing put butterfly about 10 points below the market. I will add (2) more butterflies as RUT trades higher and I will look to exit and re-position WHEN/IF RUT trades below break-even on the downside.

I will add the next butterfly when RUT crosses 1760-1770.

[IgorKeymaster]

RUT at 1781

I’m going to add another put butterfly, same 70×60 structure and I am placing my short strike 40 points above the short strike of the last butterfly (tier 1).

This adjustment will widen the tent and scale this trade to 2/3.

 

Order Ticket
Type	Asset	Duration	Strike	C/P
BTO	RUT	15JAN	1820	PUT
STO X2	RUT	15JAN	1760	PUT
BTO	RUT	15JAN	1690	PUT
Total Debit:			5.4

 

[IgorKeymaster]

RUT at 1815

We’re going to add 3rd put butterfly. We’re going to position this butterfly 40 points above last butterfly and use the same width as the last two rounds (70×60).

The next adjustment point on the upside is WHEN/IF RUT crosses 1850.

[IgorKeymaster]

RUT at 1850

I’m going to add the 4th Tier and the next adjustment will trigger a roll sequence. I will roll the lowest of 4 butterflies 40 points above the highest of 4 butterflies and I will keep the same 70X60 structure.

On the downside, I will look to scale down IF/WHEN RUT trades below 1750

[IgorKeymaster]

RUT at 1879

I’m going to close out the lowest of 4 tiers and prepare to add another butterfly when RUT trades above 1890

The next round of put butterfly will be centered at 1880 and I will use 70×60 structure for the wings.

[IgorKeymaster]

RUT at 1890

I’m going to add another round of put a butterfly, centered at 1880. The RUT has moved about 1.5std in the last 21 days. It isn’t an outlier move, but the price has moved outside of the ‘normal’ or expected range at the time of the entry of this trade. I’m going to continue to monitor the price action and if the price is moving far out of the profit tent, I will make adjustments.

[IgorKeymaster]

RUT at 1935

I’m going to close out the lowest of all 4 butterflies here:

I will look to add another put butterfly, centered at 1920, and use the same structure for the wings (70/60)

[IgorKeymaster]

RUT at 1935

Since entry, RUT has moved about 1.55 Standard Deviations and there’s been little to no reversion. All things considered, this trade is still in a position to make a profit. Ideally, we want to be out in the next 3 weeks.

I’m adding another put butterfly, centered at 1920 and this will put the price of RUT inside the tent

The next point of defense is when RUT trades above 1970

[IgorKeymaster]

RUT SCALING BUTTERFLY UPDATE:

[IgorKeymaster]

RUT at 1963

I am going to add a slightly OTM call calendar(s).

Right now my total RUT position has -9 total delta. I am looking to shave off about 1/3 of this delta to slow things down on the upside and boost theta at the same time. I’m adding Calendar spreads centered at 1990. Each calendar spread has about +1 delta and adding 3 of these will change my total delta from -9 to -6

The next potential adjustment IF/WHEN RUT trades above 2000

[IgorKeymaster]

RUT at 2007 (yay!)

I’m going to Sell To Close the lowest of 4 butterflies. This will leave 3 put butterflies and call calendars open. I plan on adding more calendars to keep the profit tent around where RUT is trading.

NOTE: We started this trade when RUT was trading around 1730. This has been a very one-sided trade and thus far, we’re within 25% MAX ALLOWABLE LOSS limit.

[IgorKeymaster]

RUT at 2017

Closing out lowest of all butterflies in RUT Scaling Income Butterfly. RUT is marching higher this morning and the lowest of all butterflies is the least useful part of this trade (unless you think there’s a chance that RUT trades back towards 1840)

[IgorKeymaster]

RUT at 2024

I’m going to close the next lowest put butterfly, leaving a put butterfly centered at 1920 and call calendars at 1990

[IgorKeymaster]

RUT at 2033

I’m going to close the last of all butterflies, leaving only the call calendars centered at 1990

[IgorKeymaster]

RUT at 2053

I’m closing out the call calendars to avoid having to fight this move in RUT. The loss in this trade is well within a Max Allowable Loss range and I will look to open a new trade.

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