Clutch arm adjustment?

When I bought my bike I noticed that the clutch cable had been replaced by a longer one and the clutch arm adjusted. The clutch doesn't totally disengage when pulled in.

I ordered a new clutch cable offline. When it gets here how do I know where to position the clutch arm?

Right now the blue lines are the positions it is at when pulled in and free, the red line is parallel to the bike.

Could you guys tell me about where to move the arm and at what position it should be at to totally disengage?

 

It pretty much takes care of itself if you install the cable right. I turn the adjuster at the clutch lever blade in all the way then run that end through the frame as the old one was and attach it to the lever. I then pull the clutch arm at the clutch hub enough to attach the other end of the cable. Finally I slip the adjuster at the hub into place. Then I adjust the lever adjuster out about 1/4 of the way, (no more than 1/2 so you have slack for roadside adjustment), then start adjusting the hub adjuster. I am looking for about 2-3mm of play at the clutch lever end. No more and no less. If you have play at the lever end then the clutch should be fully disengaged.
Your 550 is a bit different at the hub end so I'm open to anyone who has more experience with it to chime in.