Note to new readers: This is a regular update on the status of our XJO Iron Condor Model Portfolio. Please read the Iron Butterfly Trading Plan first in order to understand the objectives and the rules for trading this model portfolio.
Our June Iron Butterfly was closed on May 21 when our profit target was reached after 15 days. Our June trade was a great trade as IV was high (IV Rank of 76%) when we entered into our trade and IV fell after our trade was opened. For short premium trades like the Iron Butterfly, your unrealised profit will rise when IV falls. This is why we like to open IB trades when IV is high, preferably when IV rank is greater than 50%.
We track our monthly performance without including brokerage cost as this will vary from broker to broker. Our performance as at June 2015 is a total profit of $764.
I opened our July iron butterfly on 5 June 2015 which is 41 DTE. XJO was trading at around 5500 at the time so I sold an ATM IB at 5250/5500/5750. IV rank was 89% when I opened the trade and I managed to collect 171 points of credit for this 250 point iron butterfly. Due to the higher IV, the credit collected is higher compared to what we collected last month. The maximum profit for 1 contract is $1710 and the maximum loss is $790 ($2500 – $1710 received). Our breakeven points for this trade are 5329 (5500 – 171) and 5671 (5500 + 171).
I will provide a monthly update on this XJO Iron Butterfly portfolio. The next update will be in July 2015.
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.