$546 In Profits After Closing Iron Butterfly Positions In FXE & TLT

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Iron butterfly positions: In tonight’s video update, we’re just going to quickly go through our two closing orders that we had today. First off, I do realize I guess some people… It wasn’t all people, and I don't even know. I'm trying to dig into it more with our developer guy.  Some people did not get the email alert for the closing trade in TLT until way after the market.

The text alert went out; it looks like everything was good, 95% of people got the text alert, got the email alert on time, but then some people didn't get it, a little bit later. We’re looking into it. It sounds like it might be just an anomaly or something like that. But that’s why we try to send out both of those. I do know about that. No need to email me. We are looking into it.

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iron butterfly positions

As far as trades go today, we had two closing orders today. Generally speaking, I mean, volatility has nearly all dried up across the board. I think on our main watch list that we have, there are four or five stocks that have implied volatility over the 50th percentile which is part of the reason why we were so aggressive in getting into new trades, both earlier this week on Monday and then also on Friday last week with the Brexit stuff because it's really drying up pretty quickly. And I hope it comes back. But you can see here with FXE for example. FXE saw a huge drop in volatility today, all the way down to around 29 by the end of the day.

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And that's partly the reason to explain why we got excellent closing trades in FXE over the last two days. In fact, we closed out of trade in FXE yesterday for $96, and then we took our iron butterfly off today, bought back the entire position at 170, so we took a $216 profit on the FXE position just for this iron butterfly. And again, most of that is attributed to the drop in implied volatility.

We were also able to take later on in the day around 3:30 as bonds were starting to fade which was interesting because we saw bonds open up higher which was counterproductive to where the market opened, and then it faded out through the rest of the day. And you can see volatility continued to drop in TLT and bonds as well. As bond prices fell and volatility dropped, that created a great opportunity for us to take some money off the table with our TLT iron butterfly position.

Now, this was our June position in TLT. We bought it back for $325, so there’s still a lot of value left in those. But again, we’re buying it back around our price target that we had initially set for, and we got that off completely from our portfolio for $330 in profit. Overall, a good day, the $500+ in profits, and these trades, we haven't had on too much time at all. The TLT position on, maybe we’ve had for two weeks.

The FXE position, we've had on for about a week. When volatility is high, and the picking is good, you've got to be a little bit more aggressive in getting into those which is why we did the quantities that we did. We started doing a little bit bigger contract sizes, a little bit bigger spreads, and that all helps just create an opportunity to make a little bit more money when volatility is right for the picking. As always, I hope you guys enjoy these video updates. If you have any comments or questions, please ask them right below. And until next time, happy trading!

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.