diff --git a/trades/INTC-iron-fly-2026-05.md b/trades/INTC-iron-fly-2026-05.md new file mode 100644 index 0000000..47c8249 --- /dev/null +++ b/trades/INTC-iron-fly-2026-05.md @@ -0,0 +1,372 @@ +# INTC Iron Butterfly — Trade Plan + +**Position #5 in DB · Entered 2026-05-13 · Expiry 2027-01-15 (~247 DTE) · Status: OPEN** + +--- + +## 1. Position Snapshot + +| Leg | Side | Strike | Type | Qty | Entry Price | IV at Entry | +|---:|:---:|---:|:---:|---:|---:|---:| +| 1 | SHORT | 135 | call | 1 | $28.20 | 81.5% | +| 2 | SHORT | 135 | put | 1 | $40.52 | 87.7% | +| 3 | LONG | 100 | put | 1 | $18.40 | 82.7% | +| 4 | LONG | 160 | call | 1 | $20.90 | 80.1% | + +| Metric | Value | +|---|---:| +| Net credit collected | **+$2,942** | +| Max profit (at S = $135) | **+$2,942** | +| Max loss (at S ≤ $100) | **−$558** | +| Down breakeven (at expiry) | **$105.58** | +| Min upside floor (at S ≥ $160) | **+$442** | +| Max-profit zone width | tight (pin near $135) | +| Risk / Reward | 5.3 : 1 | +| Entry spot | $120.61 | +| Entry IV (LEAPS) | ~80% | +| Front-month IV at entry | 141% (extreme — scanner-flagged spike) | + +This is a **bullish broken-wing iron butterfly**, not a classic centered iron butterfly: +- Body strike ($135) sits ~12% above spot — directional bullish lean +- Wings asymmetric: 35 pts down (long put 100), 25 pts up (long call 160) +- Net credit ($29.42) exceeds upside wing width ($25) → no upside risk by construction +- Net delta at entry: ~+0.30 (slightly long) + +--- + +## 2. Thesis + +**Core view**: INTC is in a rally driven by US government strategic-semiconductor support (CHIPS Act / sovereign supply chain). Calm bull trend expected through the 7-month horizon. + +**What this trade is betting on (in order of importance)**: +1. INTC stays above ~$105 for the next 7 months (downside protection thesis) +2. Realized vol drops below implied vol of 80% (vol-mean-reversion thesis) +3. INTC drifts toward or above $135 by Jan 2027 (directional thesis) + +**Edge sources**: +- Selling expensive vol (LEAPS IV 80% on a name with HV30 ~89% but expected to calm) +- Short straddle decay during stable consolidation +- Asymmetric structure: max profit 5.3× max loss + +**Thesis-breaking events** (close immediately if these happen): +- Major US policy reversal on semiconductor support +- Intel-specific bad news (earnings miss, fab failure, exec turnover) +- Macro shock that cracks broad market (the gov-support edge weakens in a panic) +- INTC stock drops below $100 with clear catalyst (not just noise) + +--- + +## 3. Expected Value Analysis + +Using log-normal price evolution with risk-free = 5%, T = 7/12 yr: + +| Vol regime | P(max loss) | P(any profit) | Expected P/L | EV / max loss | +|---|---:|---:|---:|---:| +| Market-implied σ = 80% | 48% | 52% | **+$227** | 0.41× | +| Calm bull σ = 40% | 32% | 68% | **+$605** | 1.08× | +| Steady rally σ = 20% | 13% | 87% | **+$998** | 1.79× | + +**The trade is +EV across all vol regimes.** Every dollar of edge comes from realized vol being lower than implied. If the gov-support thesis is correct, that's structurally the case. + +--- + +## 4. Probability × Payoff Matrix + +| INTC at Jan-15-2027 | Outcome zone | Payoff | P (σ=80%) | P (σ=40%) | P (σ=20%) | +|---|---|---:|---:|---:|---:| +| < $100 | Max loss capped | **−$558** | 48% | 32% | 13% | +| $100 – $105.58 | Below breakeven, partial loss | avg −$280 | 4% | 6% | 4% | +| $105.58 – $135 | Up-ramp to max profit | avg +$1,500 | 15% | 32% | 63% | +| $135 (exact pin) | Max profit | +$2,942 | <1% | <1% | 1% | +| $135 – $160 | Down-ramp past pin | avg +$1,700 | 9% | 16% | 18% | +| ≥ $160 | Locked upside floor | +$442 | 24% | 14% | 3% | + +--- + +## 5. Phase-by-Phase Management Plan + +```mermaid +flowchart TD + Start([Today · INTC $120.61
Net credit $2,942 collected]) --> P1 + + P1[/"Phase 1 · Months 0-2 (May-Jul)
Theta slow · Just observe"/] + P1 -->|"INTC ≥ $115"| P1Hold[HOLD · do nothing] + P1 -->|"INTC $100-115"| P1Watch[WATCH · don't roll yet] + P1 -->|"INTC less than $96 (-20%)"| Crash{{"Crash playbook · see §8"}} + + P1Hold --> P2 + P1Watch --> P2 + + P2[/"Phase 2 · Months 3-4 (Aug-Sep)
Theta accelerating · IV likely crushed"/] + P2 -->|"P/L over +$500"| Convert[/"CONVERSION DECISION POINT
see §6"/] + P2 -->|"P/L $100-500"| Wait1[Hold, re-check next month] + P2 -->|"INTC $130-145, P/L over +$1,400"| Profit1["TAKE PARTIAL PROFIT
close 50% of position
~+$1,400 locked"] + P2 -->|"INTC less than $100"| Crash + + Convert --> P3 + Wait1 --> P3 + Profit1 --> P3 + + P3[/"Phase 3 · Months 5-6 (Oct-Nov)
Theta dominant · Pin risk rising"/] + P3 -->|"P/L ≥ +$2,000 (70%)"| FullClose[CLOSE ALL · take the win] + P3 -->|"P/L $1,000-2,000"| Roll2["Final roll-up if not converted
110-put → 115 or 120"] + P3 -->|"INTC near $135"| HoldPin[Hold to lock max] + P3 -->|"INTC drifting less than $110"| Defensive[Defensive · see §8] + + Roll2 --> P4 + HoldPin --> P4 + FullClose --> Done + Defensive --> P4 + + P4[/"Phase 4 · Month 7 (Dec-Jan 15)
Gamma + assignment risk peak"/] + P4 -->|"Anywhere"| MustClose[MANDATORY CLOSE
30 days before expiry · do not carry to settlement] + MustClose --> Done([Position closed]) +``` + +--- + +## 6. The Conversion Play (Primary Adjustment) + +If INTC stays roughly stable at ~$120 for 3 months and IV crushes from ~80% to ~60%, the position can be converted into a **near-cost-free long call** by closing 3 of 4 legs. + +### Conversion mechanics (Aug 2026 target window) + +| Leg | Entry | 3-mo mark (estimated) | Action | Realized per share | +|---|---:|---:|:---:|---:| +| SHORT call 135 | +$28.20 | $12.08 | BUY-TO-CLOSE | **+$16.12** | +| SHORT put 135 | +$40.52 | $24.25 | BUY-TO-CLOSE | **+$16.27** | +| LONG put 100 | −$18.40 | $6.46 | SELL-TO-CLOSE | **−$11.94** | +| LONG call 160 | −$20.90 | $6.02 | **KEEP** | still open | + +Net realized from 3-leg close: **+$20.45/share = +$2,045 total** + +After conversion: hold ONLY the long call 160. Effective cost basis is $20.90 paid initially − $20.45 recovered = **~$0.45/share = ~$45 net cost. Essentially a free call.** + +### Conversion payoff (4 months remaining) + +| INTC at expiry | Payoff | +|---:|---:| +| ≤ $160 | **−$45** (cost basis only) | +| $180 | +$1,955 | +| $200 | +$3,955 | +| $250 | +$8,955 | +| $300 | +$13,955 | + +### Original vs Converted — side-by-side + +| INTC at expiry | Original iron-fly | After conversion | Δ | +|---:|---:|---:|---:| +| $100 (−17%) | **−$558** | −$45 | +$513 | +| $135 (pin) | **+$2,942** | −$45 | −$2,987 | +| $160 (+33%) | +$442 | −$45 | −$487 | +| $180 (+49%) | +$442 | **+$1,955** | +$1,513 | +| $200 (+66%) | +$442 | **+$3,955** | +$3,513 | +| $250 (+107%) | +$442 | **+$8,955** | +$8,513 | + +**Crossover point: INTC must close above ~$165 at expiry for the conversion to beat the unconverted floor of +$442.** + +### Conversion preconditions (ALL three must be true) + +1. **Time**: ≥ 3 calendar months elapsed (mid-August 2026 or later) +2. **Vol**: IV percentile for the Jan 2027 expiry has dropped at least 15 points from entry (80% → ≤ 65%) +3. **Mark P/L**: Position shows ≥ +$500 unrealized profit + +If all three are satisfied → execute as a 3-leg combo order (limit price ≤ mid + $0.10 to ensure fill). + +If only 1–2 are satisfied → wait another 30 days, re-evaluate. + +--- + +## 7. Hard Rules — Pin These + +1. **NEVER hold past Dec 15, 2026** (30 DTE). Pin and assignment risk explode. +2. **TAKE PROFIT at +$2,100** (70% of max). Set as GTC limit order at broker. +3. **TAKE PARTIAL at +$1,400** if reached in months 2-3. Banked profit funds adjustments. +4. **ROLL UP only AFTER theta has paid in**. Rolling early costs more than it saves. +5. **ONE adjustment per calendar month max**. Set a phone calendar reminder; don't intraday-fuss. +6. **CLOSE the entire trade if thesis breaks** — see §2 thesis-breaking events. Don't rationalize. +7. **NEVER add short legs after a drawdown** (no "doubling down" on premium collection in a loss). +8. **All trades executed as multi-leg combos** — never leg out one at a time on LEAPS. + +--- + +## 8. Crash Playbook — INTC drops below $96 (−20%+) + +```mermaid +flowchart TD + Crash([INTC drops to $96 or below]) --> When{"How much time left?"} + + When -->|"≥ 4 months"| LongTime["Thesis still alive?"] + When -->|"less than 4 months"| ShortTime["Position locked near max loss"] + + LongTime -->|"YES - gov support intact"| Roll["Roll position OUT in time
Close current legs, reopen at Jan 2028"] + LongTime -->|"NO - story broken"| ExitNow["CLOSE EVERYTHING NOW
Accept ~$400-550 loss"] + + ShortTime -->|"Margin OK"| HoldOut["HOLD to expiry
Max loss bounded at -$558
Hope for end-of-trade rally"] + ShortTime -->|"Need capital / margin issue"| CleanClose["Close all 4 legs
Take the ~$558 hit"] + + Roll --> Done + ExitNow --> Done + HoldOut --> Done + CleanClose --> Done([Recovered to neutral]) +``` + +**Critical reminders during a crash:** +- Max loss is HARD-CAPPED at $558. A −30% drop costs the same as −20%. **Do not panic-close at the bottom.** +- Do NOT try to roll the long put up after a drop. The roll becomes expensive precisely when needed. +- Do NOT add short put strikes below 100 to "harvest premium" — that increases tail exposure. +- The ONLY useful crash adjustment is rolling OUT in time (Jan 2028) for more recovery runway. + +--- + +## 9. Decision Matrix by Price Zone + +| INTC price | % vs entry | Phase 1 (M0-2) | Phase 2 (M3-4) | Phase 3 (M5-6) | Phase 4 (M7) | +|---|---:|---|---|---|---| +| $160+ | +33% | hold | hold or close at 70% | close, capture floor | mandatory close | +| $135-145 | +12-20% | hold | partial profit if ≥ +$1,400 | full close if ≥ +$2,000 | mandatory close | +| $120-135 | 0 to +12% | hold | **convert** if conditions met | full close at 70% | mandatory close | +| $110-120 | −8 to 0% | hold | hold, don't convert yet | reassess | mandatory close | +| $105-110 | −9 to −13% | hold | decide: trust or exit | exit if still here | mandatory close | +| $96-105 | −13 to −20% | watch | defensive mode | crash playbook | mandatory close | +| < $96 | > −20% | crash playbook | + crash playbook | crash playbook | mandatory close | + +--- + +## 10. Trade Journal Template + +Update at every decision point. Brief, factual, dated. + +``` +[YYYY-MM-DD] · INTC $___ · IV ___% · Position mark P/L: $___ +Decision: [HOLD / ADJUST / CLOSE] +Action taken: ___ +Rule cited: ___ +Emotional state (1-5): ___ 1 = panicked, 5 = bored +``` + +--- + +## 11. Performance Tracking + +After the trade closes, fill in: + +- Final P/L: $___ +- vs Max Profit: ___% captured +- Days held: ___ +- Number of adjustments: ___ +- Largest mark-to-market drawdown: $___ +- Was the original thesis right? [Y/N + brief note] +- Was the structure right for the thesis? [Y/N + brief note] +- Lesson for next time: ___ + +--- + +## 12. The 10/10 Plan — What This Trade is Missing + +This specific position (Phases 1-8 above) is roughly an **8.5/10 execution** of an asymmetric short-vol structure. Five concrete upgrades close the gap to a 10/10 *trading practice*. Most of them apply to your broader workflow, not just this one position. + +### 12.1 Pre-staged broker orders (no "I'll watch and decide") + +Every adjustment described in §5–§7 should be **a live order at the broker**, not a mental rule. Eliminates emotion in the moment. + +| Trigger | Pre-staged order | +|---|---| +| Take profit at +$2,100 | GTC limit closing combo, working 24/5 | +| Partial profit at +$1,400 (mo 2-3) | GTC limit closing 2 of 4 legs | +| Crash alert at INTC < $105 | Price alert → text/email + pre-written 3-leg combo ready to submit | +| Conversion trigger at month 3 | Calendar alert + pre-written 3-leg close combo | +| Mandatory close at Dec 15 | GTC market closing combo dated Dec 14 | + +**Why**: Discretionary closes leak ~$50-200 per trade in "I'll wait for a little more" slippage. Mechanical closes don't. + +### 12.2 Multi-name diversification — the real edge + +A single $558 risk on INTC is fine. But **4-5 uncorrelated trades at $100-150 each** is structurally better. Same total risk, but variance drops because the names move independently. + +| Symbol | Setup type | Why | +|---|---|---| +| INTC | iron-fly 100/135/160 (current) | gov-support narrative | +| GOOGL | iron-fly at ATM after big move | post-earnings IV crush is reliable | +| AAPL | iron-fly slightly bullish strikes | low-vol consolidation play | +| AMD | bull put spread | semis exposure without INTC concentration | +| SPY | calendar spread ATM | broader-market vol harvester | + +With ρ ≈ 0.3 between the names, portfolio σ ≈ **0.49 × single-trade σ**. Half the variance for the same expected return. This is the only free lunch in finance. + +### 12.3 Volatility-regime entry filter + +Don't enter iron flies blindly. **Only when the symbol's IV is rich relative to its own recent range.** + +``` +ENTRY GATE: IV Rank ≥ 60 AND IV percentile ≥ 75 +SKIP GATE: IV Rank < 30 → premium too cheap, wait +WAIT GATE: IV Rank 30-60 → marginal, only if other edge present +``` + +The scanner page already saves snapshots and computes baseline IV. Add an "IV Rank (1y)" column and an "Enter Trade?" gate. + +### 12.4 Size by % of portfolio, not arbitrary dollars + +Each trade should risk a **fixed % of total trading capital** — not a fixed dollar amount you picked because it "felt right." + +| Account size | Risk per trade @ 1% | Risk per trade @ 2% (aggressive) | +|---|---:|---:| +| $20k | $200 | $400 | +| $50k | $500 | $1,000 | +| $100k | $1,000 | $2,000 | +| $250k | $2,500 | $5,000 | + +If $558 max loss is more than 2% of your account, this position is too big. If less than 0.5%, you're under-deployed and the wins won't compound meaningfully. + +### 12.5 Use a directional structure when the view is directional + +This is the biggest structural critique. If you're **strongly bullish** on the gov-support narrative, the iron fly is **the wrong structure** for your thesis. It caps your upside at $442 above $160 — exactly the zone you think INTC will reach. + +The right structure for a strong bullish view: + +``` +ALTERNATIVE: Long Call Diagonal (10/10 for strong bullish conviction) + +LONG Jan 2027 $125 call (pays ~$28) +SHORT Aug 2026 $145 call (collects ~$8) +Net debit: $20/share = $2,000 +``` + +| Property | Current iron-fly | Long call diagonal | +|---|---|---| +| Max loss | $558 | $2,000 (the net debit) | +| Max profit at INTC = $145 (Aug) | $2,942 | rolls into LEAPS call | +| INTC at $200 by Jan | +$442 | **+$5,500+** | +| INTC at $250 by Jan | +$442 | **+$10,500+** | +| Theta capture | Yes, slow | Yes, faster (short near-term call) | +| Vega | Short | Mixed | +| Capital efficient | Yes (small risk) | No (larger debit) | +| Best for | Calm sideways → mild bull | Strong rally | + +The diagonal expresses bullishness honestly — you give up the cheap-and-defined-risk profile but you uncap the upside that matches your thesis. **Don't use a neutral-with-edge structure for a high-conviction directional view.** + +### 12.6 The 10/10 plan in one sentence + +> Run the conversion-style iron fly across 4–5 uncorrelated symbols at 1% portfolio risk each, gated by IV Rank ≥ 60, with all profit-take and crash orders pre-staged at the broker, AND a separate small directional position (long call diagonal or straight LEAPS) on your one highest-conviction name to capture the moonshot scenario the iron fly caps. + +### 12.7 What this means for THIS position + +The current INTC iron fly is already entered — these 10/10 upgrades don't make it worse, they just say: next time, pair an iron fly with a small directional companion trade. + +**Action item for THIS position**: keep it as-is, follow §5-§8. But also consider opening a **small ($300-500 debit) Jan 2027 long $130 call** alongside it as a separate "moonshot capture" leg. The iron fly handles the calm-rally scenario; the long call handles the gov-shock-rally scenario. Together they cover the full bullish thesis without leaving the upside on the table. + +| Combined position | Max loss | Best case (INTC $200) | Calm-rally case (INTC $135) | +|---|---:|---:|---:| +| Iron fly alone | −$558 | +$442 | **+$2,942** | +| Long call alone | −$500 (debit) | +$6,500 | −$500 | +| **Both together** | **−$1,058** | **+$6,942** | **+$2,442** | + +Cost: an extra $500 of capital at risk. Gain: meaningful upside capture if you're right about the moonshot. Worst case: INTC stays calm and you net $2,442 (still positive) instead of $2,942. **The companion trade is a $500 cost to remove the upside cap.** + +That single addition takes this specific situation from 8.5/10 to ~9.5/10. The remaining 0.5 is multi-name diversification, which only matters across many trades — not this one. + +--- + +*Last updated: 2026-05-13. Trade plan is a living document — revise at each decision point.*