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.
August was another winning month for our Iron Butterfly Model Portfolio Our August Iron Butterfly was closed on July 28 when our profit target was achieved in 15 days.
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 August 2015 is a total profit of $1264 or roughly 25% of our starting capital of $5000.
I opened our September iron butterfly on 7 Aug 2015 which is 41 DTE. Sentiment for September expiry was very bearish that day as the ATM option (ie the one with delta of 50) was priced at 5425 points which was about 85 points below 5512 which was the price of the index at the time (see options chain below).
I decided to sell a slightly bearish IB at 5200/5450/5700. IV rank was 74% when I opened the trade and I managed to collect 162 points of credit for this 250 point iron butterfly. The maximum profit for 1 contract is $1620 and the maximum loss is $880 ($2500 – $1620 received). Our breakeven points for this trade are 5283 (5450 – 162) and 5617 (5450 + 167).
I will provide a monthly update on this XJO Iron Butterfly portfolio. The next update will be in September 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.