Trade Details & Summary

FXE Iron Butterfly (LIVE Closing Trade)

Just five days after the BREXIT vote trade in FXE we closed our iron butterfly option trade for a $216 profit.


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In this live trading video, what we're going to try to do here is close out of out our FXE iron butterfly position. This is a position which I think, got a lot of people scared when we got into it because we entered this position the day that the U.K. voted to exit the euro zone or the Brexit and if you're watching this video, that's probably been a long time now or maybe it hasn't been a long time.

But we entered this trade the day when the market was down 4% and FXE, which is the euro ETF, was down big time that day. But we knew that the short-term volatility spike was going to disappear.

And now that it has we're into this trade now for about five days total. Like five actual calendar days, about three or four trading days. And we've made a pretty decent profit on this trade already and well beyond our expected target here today.

So we're going to go ahead and take this trade-off today. We've made about $220 on this trade. It's a three lot that we traded, an iron butterfly. Which just means that the sort strikes that we're trading which is the 108 calls, and puts were the same.

So you can think of it as a straddle that we're selling the 108 calls and puts. And then we went out on either end and bought protection at 112 and then 103. If you look here, you can see, this is the date that we entered the trade, 6/24 we entered the trade, in the afternoon.

Again, this is the day that Brexit was announced. So the eurozone had a massive fall that day. FXE fell from about 112 down to about 108. But we knew that that volatility was going to continue to crush.

So now that that news was disseminated, good, bad or indifferent and we've said this multiple times. Whenever news is known, whether it's good, or bad or whatever the case is, that causes volatility to fall. So when there's unknown information, again, good, bad or indifferent. As long as it's unknown, that usually causes volatility to rise across the board.

We're also seeing this right now in things like the market where we made a lot of trades, again, that day that Brexit was announced. We knew that volatility would contract and it did. And so that's been real, really well for our portfolio.

There's a lot of volatility in pricing here, but at the end of the day the markets are pretty much where they were posted Brexit, you know, give or take a few percentage points here. So, again, in this case, we're going to go ahead and try to close out this position.

With this one, we usually try to close out of with these iron butterflies, just the short strikes. Because those are the one's that we're being challenged on or going to be in the money. The short strike on the 108 call is about 103. Worth 103 right now. Sort strike on the 108 put is about 75.

We could leave on these long options on either end to expire worthlessly, but since we've got three of them ... Three of them at $7.00, that's about $21.00 of potential premium and then about $12.00 of potential premium. So we could end up leaving about 30-40 dollars of the potential premium on the table.

For us, the commission cost to close these out is still under what we'd get back by selling those. So in this case, with this iron butterfly, we're going to go ahead and close out of the entire position in one full swoop. Just to give you another look at it, here is where the iron butterfly is here for FXE.

We had a little bit bearish in tilt which worked out well for us. You can see the market is kind of trading right around out short strikes. We've made the vast majority of money that we can ... We've made the potential premium target that we track here with these iron butterflies.

So, could we hold it for another 16 days and try to squeeze out a lot of premium? Sure. But that doesn't work in our system . We've found that continuously trading and closing out of these positions early, taking money off the table and managing profits are always the best way to go. Because we don't know where the euro is going to end up in the next 16 days.

So, in this case, all we're going to do is going to click right on it, create closing order. Again, inside think or swim in most broker platforms, it does go in like an iron butterfly ... As an iron condor order. Most broker platforms don't have the, I guess, tagging for an iron condor. I'm sorry, iron butterfly. But it is an iron butterfly in the same short strikes.

We're going to go ahead and close it out, probably about a 170 debit. We'll just pay a little bit above what the market is pricing it right now. The market is pricing it about 169. We're going to try to fill it at 170, see if we can get filled a little bit quicker. Offer a little bit more for the spread overall.

You can see that that fill just happened live right on the screen. So, now we're out at 170, took about a $220.00 profit off the table here today, so a nice little trade for a couple of days of risk. And again, I think the key here is that you can't be afraid to leverage into and to get aggressively invested when volatility is high.

That's when our edge is greatest; that's when our premium is most significant. It's times like these where you can make a lot of money in a short period just by doing what other people don't do or what other people are afraid to do. So, hopefully, this was an excellent example again, today we got filled here.

So this alert will go out to out members, apparently, and then we'll post this video about 15 days afterward, live for everyone to see. As always, hope you guys enjoy these. If you have any comments or questions, please ask them in the comments section right below. And until next time, happy trading.

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