After some shake and bake, RUT is now trading into all time highs. Because of our net short exposure, we must adjust.
To recap the total trade positioning, we put on:
1. A Mar 1100/1150/1200 Iron Butterfly
2. A Mar 1140/1290/1240 Iron Butterfly
3. A Mar 1120/1170/1220 Iron Butterfly
4. A Mar 1030/1080/1130 Iron Butterfly
If you look at them individually, you’ll see that #1 is about breakeven, #2 is a big winner, #3 is a small loser and #4 is a big loser.
The main thing we’ve got to worry about is if RUT rips to 1200 in short order. To protect against this, we will buy a 1×2.
Sell -2 Mar 1200 Calls
Buy +4 Mar 1210 Calls
Net cost: 300 per spread
This is just a super simple hedge against upside rippage.
We will reassess the trade in 10 days.