The problem is...you didn't hedge the position with a Long Call like I did. Now you are deep in the hole on the position.
Currently, you are down 46%.
Here is my PnL curve...
I am still down, but only 25%. And as you can see the upside risk is substantially reduced for a while for me. As the position matures, I will have to readjust, since the hedge I employed will start losing its benefits.
And because you only opened 1 contract, you are unable to reduce your position without closing the entire position.
Your best option at this point is to change the Butterfly into a Call Condor.
To do this, "buy to close" the 136-141 credit spread (1 contract each), and "sell to open" a higher credit spread. I would sell to open a 1 contract 148-153 credit spread (sell 1 contract Oct 148 Call strike, buy 1 contract Oct 1153 strike). This would turn your PnL curve into this...
With this strategy you have minimally reduced your net Delta from -13 to -11, but you have created a decent landing platform for profit by expiration. Per the curve, at expiration, any price movement between $133.55 - $148.51 would be 32% profit. The downside of this strategy is that it increase the capital at risk by 4X...from $101 to $382 (not including commissions). So, it has its benefits and its risks...just like any adjustment. The newer 148 short strike has a delta ~22. This is a little aggressive and you could go higher on your spread, but it brings in decent credit.
Another adjustment would be to turn the butterfly into a ratio spread. If you "bought to open" 2 contracts of the 131-136 Oct debit spread, you would get a PnL looking like this...
The benefit is that you have essentially capped your maximum loss where its at. You wouldn't lose anymore than $52 at expiration UNLESS SPY drops below $135 by expiration. However, as you can see from the PnL, if it goes down substantially, towards $135, there would be ample opportunity to exit the position prior to expiration with a great profit. Maximum profit would be $446 at the 136 strike. The downside of this strategy is that it brings the capital employment up to $1058, essentially increasing the original capital committed by 10X. That is why it is essential to leave free cash to be able to hedge these positions.
You could also just hang on for a while and see if it goes back down. Currently, $140.05 is your breakeven point. In 14 days your breakeven is $141.38.
Or you could just close the position, learn a valuable lesson in options trading (ie adjust early to control your deltas) and start papertrading the next one.
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