I put on this trade today around 1:20 pm central time in Sheridan TV. I bought 1 2560 C , S 2 2590 C, B 1 2615 C, for an $11.90 Debit. SPX is trading at $2589 and I am trading the Dec 1 Expiration, 15 Days out.
4 Step Risk Management Plan
Step #1 Set Up: Sold ATM Call 2 times, Bought the ITM call, 30 points lower than the ATM call, and also Bought 1 call 25 points higher than the short call. My beginning position Greeks are about short 4.34 Deltas for every 1-2-1 Butterfly. Shorter than I normally do , but with the market so high already today , I decided to be a little shorter when starting. This just means I would adjust quicker on the upside than the downside.
Step 2 Profit Target and Max Loss- 8-10 % profit and 10-12% Max Loss on Capital in this example of around $1190, my debit. Would have order in to sell Fly for $12.80 or $12.85 for profit. If the Spread value went under 10.70, would get out
Step 3- When to Adjust? Downside: 2570. Upside: 2600
Step 4- How to Adjust? Roll the short call up ( upside adjustment) or short put down ( downside adjustment), by 5-10 points to reduce the position deltas 2/3.