Dec 2016 Butterfly #1 – RUT

Day 1 – 1 Nov 2016

  1. US election is around the corner with polling day on 8 Nov 2016. Overall market has been quite sensitive with news that are related to both the candidates, mostly to the downside.
  2. Today RVX was as high as 23, steadily climbing up since 6 days ago.
  3. Bought 2 butterflies with more room for the downside risk @ $9.75 each. 44 days to expiry.
  4. Bought 2 IWM calls as hedge for the upside @ $1.30 each. 45 days to expiry


Day 2 – 2 Nov 2016

  1. Overall market continues to go down. Decided to close one of the IWM LONG CALL to reduce loss from the hedge since I don’t need it for now.
  2. There will be FOMC statement later at 2pm EST. Since this is a non-directional trade, I can actually keep this trade running and adjust when it moves into the adjustment zone.
  3. However the BUTTERFLY is already profitable only after one day in trade, coupled with the FOMC statement event, I decided to close this trade and book whateve quick profit the market offered.
  4. I will re-open the BUTTERFLY after the FOMC event later.

Trade Summary

  1. Winning trade, nett profit $101.52
  2. It is good to book whatever profit that was on offer, especially when the trade was only opened for 2 days.
  3. Closing the trade to avoid the swing around major announcement is good for psychology.

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