Trade Details & Summary

IWM Iron Butterfly (LIVE Closing Trade)

Exiting this IWM iron butterfly options trade gave us a $1,100+ profit after pinning the stock price one day before expiration at the peak of our spread.

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  • Hey Scott – glad you found us! Yes PRO would get you the alerts whenever I make a trade. My account size is multiple 6-figures but you can always scale down or up positions to fit your portfolio. Plus if we ever do a strangle or straddle we’ll always suggest the risk-defined alternative iron condor or iron butterfly so you can trade it in your IRA etc.

  • bubba123

    Hi Kirk,

    I was watching your video on short call options, and in it you mention you have had great success with this strategy and it’s been profitable. Where can we see your real performance? Do you have multiple portfolios? Or 1 which has all of them?

  • You could do that but in my opinion it’s still the continuation of a trade unless you wanted to be short the stock moving forward. If we get all of our premium it’s not a 100% gain because we might have had to put up $2,000 in margin for the position (just an example). So yes we captured 100% of the premium but not a 100% gain.

    • bubba123

      Oh do you calculate return on a trade based upon the margin used for the premium. So for instance, say you receive 2$ premium selling a call i.e. $200. then it’s a 10% return based on $2000 margin used? Same would be for selling puts? How does one calculate the margin used on a sold call and a sold put?

      • Correct. We calculate it based on initial margin requirements.

  • Haha glad it helped

    • Pacemaker4

      whew… it helped … nailed CCL for 138K…. im up huge now…
      so there I was at 9:39am… after selling and i had doubled the account. One position.Then I was doing laundry. Option super star folding sheets..and thinking of butterflies….

      If SPY goes up to 215.5… you might hire me ;-)
      damn this is fun, and I don’t see much of a down side so far. Granted volatility has been decent. add the fed, and election debate, a few earnings..

      Is 9000 contract size (28 Sept SPY) too big? Not too big for my diamond condor that I sell ……I want 1 million by next week.
      Its nice to see $1,600,000 in a position …even if in brackets. oh and buy something for god sake. SPY isnt going to rise on its own… open a

      what are some high volume inverse correlated stocks with SPY? figure I can try my hand at pairs trading and auto trades…

      I want hand holding for 20mins at a time… usually after I look and see 130K in commissions in 10days….

      all thanks to you… when I use real cash youre the first stop.

  • John Mascaro

    Kirk, another question: if we notice one of our positions go above 50% profit target and you haven’t yet closed it I sssume that we can do so on our own if we feel more
    comfortable taking the money and running earlier than you right?

  • We would have been assigned on one of our short ATM Strikes at expiration and still would have ended up with a win but would have gone through that process and paid higher commissions to do it.

  • Because in the last week it came in and decayed really fast while not moving so we held slightly longer.

  • Kathryn Jenna

    Hey Kirk, whats your prediction for 2017?

    • I never make predictions – it’s a bad habit to try and predict the future of the market.

  • Yep probably – I focus only on highly liquid underlyings – stick to those and forget the rest.

  • Ron Macdonald

    I’ve been attempting to do some simulated trades on SinkorWwim and tried to immitate one of your Iron Butterfly trades just for practice. In right clicking on the particular strike price I have the option of choosing sell and again given the option of choosing which strategy. There was a Butterfly but no Iron Butterfly to choose from. Any thoughts on why that would be?

    • You just start with an iron butterfly order and manually change the short strikes.

Show Video Transcript +

The market has just opened here and we're going to go in and close out an IWM iron butterfly trade that we had. We had a nice wide iron butterfly trade that we entered primarily when the market fell.

And since then, the market has traded sideways and that's really helped our position. Everything in this trade is centered around the 100 strike. Now, what we're going to do is we're just going to go here and close it out. We're now a couple of days from expiration.

Just two days basically from expiration. And you can see this right now is our IWM positions. We've got an iron condor on for February and then we've got another one on that we legged into in March as well. But this February position is making about $1,100 right now.

Now that we're close to expiration, we've got about a day left, there's not really anything that we can do besides this. I mean, the stock is basically trading exactly perfectly where we want it.

Remember, with these iron butterfly trades - Let me actually go to the trade tab here, so you guys can see this. With these iron butterfly trades, what you're basically looking for is you're basically looking for the stock to close at the peak of the butterfly.

And in this case, this is what happened here with this iron butterfly. We sold options at the 100 strikes. We sold the 100 strike calls and the 100 strike puts and then we bought options far out for protection and to reduce margins. We bought the 110 calls which are all the way out here and then we bought the 90 puts which are all the way down here.

And again, that adds a layer of protection for our trade, so that if the market makes a really big move, then we're protected to the downside. But that also reduces our margin requirement on this trade. And now you can see with about a day and a half to go till expiration, the stock is basically trading exactly where we want it to be.

We're going to go ahead and close out this trade. But what we're going to do instead of closing out the entire iron butterfly is we're just going to close out the short legs or the short strikes at the 100. And the reason that we're going to do that is because these are the only strikes that really have any value left that we have to close out.

You'll notice that the two long strikes that we have, three contracts of each, these don't really have any value left. Notice that the mark on these, there's no more value left in these, so there's really nothing that we can have gain by selling them back or buying them back. I mean, we're going to pay more in commission than we are to close them out.

In this case, we're going to let these two long legs far out of the money expire worthless and we're just going to go ahead and buyback the short legs. All you got to do at least inside Thinkorswim is just right-click on the entire order. You're going to create a closing order and then you're going to go down to just buy the straddle.

Again, notice we're not buying back the entire iron condor. We're just buying back the straddle here at 100. And again, that's going to also give us a nice quicker fill. We're going to throw in a debit price of 150 because that's where it's trading and then just hit confirm and send. That should fill here pretty quickly and then we'll be out of this contract.

Alright, you can see now that that order did get filled here. It only took about a minute or so. Pause the video real quick. But you know that we're out now at the 150 debit, so we basically locked in that profit.

And again, what basically is going to happen is that it's going to leave. In this case for the iron butterfly, it's going to leave on these two long legs, but again, there's no value left in them. They're worth $.50 each, so there's nothing that we can gain, net of commissions to close those out.

We'll just let those be out of the money and expire worthless over expiration. Hopefully this was a really good example of how to close out of an iron butterfly when you have a nice profit at the end of expiration.

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