Going to put some money to work in April opex.
This is a tiered play, so start with 1/3 size and we will add on as the market moves.
Here’s the first trade:
SPX Iron Butterfly
Sell to open Apr 1800/1850 bull put spread @ 15.00
Sell to open Apr 1850/1900 bear call spread @ 22.25
When the SPX moves 30 points then we will add to the trade.
Update: March 21st, 2014
We’ve got a 30 point move now, so what we are going to do is roll the call spread of this butterfly higher.
So it will, in effect, turn from an iron butterfly to an iron condor.
This can be executed through a “butterfly roll.”
Buy Apr 1850/1900/1950 Call butterfly for 20.70 or better.
If you aren’t getting a fill, split the trade up into the 1850/1900 call spread buy and the 1900/1950 call spread sale.
If we see a move to 1910 we will hedge off some upside risk, either by rolling the call spread higher once again, or buying some upside butterflies to reduce risk.
Looking to be in this trade for 2 more weeks.
Update: April 7th, 2014
Because the IV in the options was so low, we had to wait a while for the profits to materialize.
The trade is currently sitting at 18% return on risk, which is close enough to my target 20%.
Close out SPX Iron Condor (it’s an iron condor now because we started with an iron butterfly and rolled the call side higher.)
Margin and P/L
Spread Width: 5000
Put Spread Credit: 15.00
Call Spread Credit: 22.25