Note to new readers: This is a regular update on the status of our XJO Iron Butterfly 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 July Iron Butterfly would have been closed on June 30 when our profit target of $250 per contract was achieved as shown below.
Source: Interactive Broker Risk Navigator
The above is taken from a “what-if” portfolio which I created to monitor this trade. As I was travelling and could not watch the market closely, I decided to close this trade in my real account for breakeven on June 14, before the Greek debt deadline, just in case there was a big move and I am unable to close the trade when our stop loss is reached. Despite the global dramas (i.e Grexit and the Chinese stock market crash) in the past 30 days, XJO managed to stay in a narrow range of 5400 – 5700!
We track our monthly performance in a similar fashion as our first XJO Iron Condor Model Portfolio i.e. without including brokerage cost as this will vary from broker to broker. Our performance as at July 2015 is a total profit of $1014.
I opened our August iron butterfly on 13 July 2015 which is 38 DTE. XJO was trading at around 5525 at the time so I sold an ATM IB at 5275/5525/5775. IV rank was 84% when I opened the trade and I managed to collect 167 points of credit for this 250 point iron butterfly. As IV was still high, the credit collected was still pretty high even with a reduced duration of 38 days. The maximum profit for 1 contract is $1670 and the maximum loss is $830 ($2500 – $1670 received). Our breakeven points for this trade are 5358 (5525 – 167) and 5692 (5525 + 167).
I will provide a monthly update on this XJO Iron Butterfly portfolio. The next update will be in August 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.