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**

---

## 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<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])
```

---

## 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<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.

---

## 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 describe what to do next time, and what to do at the conversion point.

**Action item for THIS position**: keep it as-is, follow §5-§8. **DO NOT** open a separate long call now as a "companion" — INTC IV is too rich, and a Jan 2027 OTM call costs $1,500-1,900 (3-4× the iron fly's own max loss). Buying expensive vol while betting that vol will fall is internally inconsistent.

**The real "companion" is the conversion product itself.** §6 already describes it:

> After 3 months of stable INTC + IV crush, close 3 legs of the iron fly. You're left holding the original long $160 call at a near-zero net cost basis, financed by realized theta from the short straddle and the long $100 put.

**The conversion IS the companion long call.** It gives you:
- Uncapped upside above $160 (vs the iron fly's +$442 cap)
- ~$45 net cost basis (vs $1,870 if bought outright today)
- Funded by 3 months of time decay, not fresh capital
- Same Jan 2027 expiry, same $160 strike — same payoff profile as a standalone long call, but at 4% of the cost

```
Two paths to the same position (long $160 call, Jan 2027):

  Buy outright now           →   pay $1,870 cash
  Iron fly + 3-month convert →   pay ~$45 net (theta funds it)
                                  + collect ~$2,000 realized profit along the way
```

The conversion is dramatically more capital-efficient than opening a separate companion trade. **Treat §6 as the companion plan, not an additional position.**

#### Rejected alternatives (and why)

| Idea | Cost | Why rejected |
|---|---:|---|
| Add a long $170 call now | $1,870 | 3.4× iron fly risk; buys expensive 80% IV; redundant with conversion plan |
| Add a $160/$190 call spread now | $790 | Caps moonshot; defeats the "uncap upside" goal |
| Add a long $200 call now | ~$800-1,000 | Not in current chain; far OTM with limited delta |

**Decision: NO companion position added at entry.** The §6 conversion creates the equivalent position at a fraction of the cost.

---

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