Note to new readers: This is a regular update on the status of our XJO Iron Condor (Mark II) Model Portfolio. Please read the Trading Plan first in order to understand the objectives and the rules for trading this model portfolio.
June was another winning month for our iron condor model portfolio. We hit our 50% profit target in only 16 days so our June trade was closed by May 22. As we scaled up our capital allocation due to the high IV, our gross profit for June was $840. The performance of the XJO Iron Condor (Mark II) portfolio as at June 2015 is -$9,345.
June was the perfect month for trading iron condors as IV was high (IV Rank of 76%) when we opened our June trade on May 6. IV fell after that which was very good for our trade. Decreasing volatility (see green line) is good for short premium trades as shown in the profit graph below:
Our revised Trading Plan which is to sell Iron Condors at 16-20 deltas and managing at 50% seems to be working very well. Trade management was simple as the trade was automatically closed by a good-til-cancelled order which I put on immediately after I opened the trade.
Other research has also shown that we are on the right track with our iron condor trading strategy. Dave from DTR Trading back tested 128 SPX iron condor variations with different durations and trade management rules (Thanks Jim for the tweet!). No trade was held to expiry – all trades were closed latest by 8 DTE if they were not closed before that by other trade management rules. The top 20 best performing strategies are shown in the table below (click to enlarge):
Source: DTR Trading
The top 5 were 38 DTE iron condors where the short option was at 20 delta and all were managed at 50%. The average profit per trade for the top 2 was 5.9%, the winning percentage (over 100 trades) was 86% and average days held was 21 days. The total profit after 100 months (8.3 years) was 593%. The test period included the GFC in 2008 and trades were placed every month regardless of IV. It is interesting to note that the iron condors performed very well in the past 4 years even though IV was low.
More details of this extensive study can be found on the DTR Trading blog. With the knowledge gained from the DTR Trading study, I would like to wrap up our XJO Mark II Model portfolio this month which coincides with the end of FY2015. In FY2016, we will start a Mark III XJO iron condor model portfolio following the same trading rules as Dave’s top performing iron condor strategies.
Disclaimer: This post is for educational purposes only and should not be treated as investment advice. This strategy would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek investment advice if required.