options-pricer/trades/INTC-iron-fly-2026-05.md

INTC Iron Butterfly — Trade Plan

Position #5 in DB · Entered 2026-05-13 · Expiry 2027-01-15 (~247 DTE) · Status: OPEN

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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)

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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)

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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.

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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%

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5. Phase-by-Phase Management Plan

flowchart TD
    Start([Today · INTC $120.61<br/>Net credit $2,942 collected]) --> P1

    P1[/"Phase 1 · Months 0-2 (May-Jul)<br/>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)<br/>Theta accelerating · IV likely crushed"/]
    P2 -->|"P/L over +$500"| Convert[/"CONVERSION DECISION POINT<br/>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<br/>close 50% of position<br/>~+$1,400 locked"]
    P2 -->|"INTC less than $100"| Crash

    Convert --> P3
    Wait1 --> P3
    Profit1 --> P3

    P3[/"Phase 3 · Months 5-6 (Oct-Nov)<br/>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<br/>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)<br/>Gamma + assignment risk peak"/]
    P4 -->|"Anywhere"| MustClose[MANDATORY CLOSE<br/>30 days before expiry · do not carry to settlement]
    MustClose --> Done([Position closed])

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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.

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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.

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8. Crash Playbook — INTC drops below $96 (−20%+)

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<br/>Close current legs, reopen at Jan 2028"]
    LongTime -->|"NO - story broken"| ExitNow["CLOSE EVERYTHING NOW<br/>Accept ~$400-550 loss"]

    ShortTime -->|"Margin OK"| HoldOut["HOLD to expiry<br/>Max loss bounded at -$558<br/>Hope for end-of-trade rally"]
    ShortTime -->|"Need capital / margin issue"| CleanClose["Close all 4 legs<br/>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.

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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

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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

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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: ___

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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.

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Last updated: 2026-05-13. Trade plan is a living document — revise at each decision point.