December 27, 2011 Trade Update

Hi All,

RUT finally hit the adjustment point for the January Bearish Butterfly today. Therefore, I rolled the 680 butterfly up to 740. The position now consists of 6 butterflies with 2 butterflies having short strikes at each of the following price points: 700, 720 and 740. The next adjustment point is at RUT = 760 where the 700 butterfly will be rolled to 760. We are currently 23 days till expiration. At 21 DTE (Thursday) the profit target will be lowered from $3000 to $1000. All we need is a small pull back under 745 and we should be able to get the reduced profit target. If the price decides to continue up however, we’ll stay with it as long as we can or until the lowered target is hit. The new position is up about $350 and is shown below:

The Delta and gamma on the January M3 are higher than I would like. I had orders in most of the day to remove the 660/670 call verticals for 9.50 after which I planned on selling 1 of the 690 butterflies to bring my Delta and Gamma into acceptable levels but those orders never filled, so I did nothing. If the price happens to start moving aggressively up or sits in this area for the rest of the week, the aforementioned orders will get filled and the Delta/Gamma issue will be resolved so I am not too concerned sitting a little high on the Delta right now. And if the price drops, I should be able to exit near profit target which would be the preferred scenario. The position is currently up $582.

The February position remains the same and is at break even.

I have chosen to hold off entering the February M3 till the position is corrected either by the orders previously mentioned fill or the position is closed.

That’s all for now, Happy Trading!