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Confidence in the economy continues to grow and feed the rally in the markets. The Russell 2000 Index (RUT) closed up at $522.02, surpassing the recent high of $520 on July 1, and closing in on the high of $535 set June 5. I began hedging my Aug iron butterfly at 440/490 and 510/560 by rolling one of the pairs of spreads up one strike to 450/500 and 520/570 (closing one contract of the call spreads and one contract of the put spreads and opening new spreads one strike upward). This moderated the delta somewhat to -$69 with theta = +$68. I am not optimistic that RUT will break this next resistance level, so I didn't roll more than one strike upward. If I am wrong, then I will either roll further upward or close the trade.

My Aug iron condor stands at a P/L of -$880 with a delta = -$61 and a positive theta of $44. Our Sept $530 calls are effectively holding our losses in check, but our theta position is deteriorating. If theta goes negative or RUT breaks $535, I will close this position for a loss.

Note that hedging our position does not turn the trade into a winner, but it holds our losses to a reasonable number (our goal with the condor is to hold our loss to less than the original credit of $4,000, and buy us time for the market to pull back).

Losses are a necessary part of trading; learning the techniques to control and minimize the loss allows you to stay in business.