Bullish Iron Butterflies (Appendix)

I’ve been going through my “drafts” folder this year trying to finish partially-written blog posts and get more organized. This post began an eight-part mini-series on bullish iron butterflies (IBF). My drafts folder contained one additional post containing miscellaneous thoughts about the trade and development. In the longshot case that someone out there could possibly benefit from any of this, here is that post from Sep 2017.

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With the bullish IBF, I have found profit factor to be much lower and complicated backtesting with OptionVue. What about profit per commission?

Intuitively, I feel the market moves around in gross points more than proportionately to the underlying value. Does ATR truly capture this? If not, then perhaps fixed width rather than a dynamic butterfly is the way to go. In that case, I should just repeat my backtesting with different widths and see what works best. That would also allow for easier MAE analysis, which I might be finding right now is impossible due to varying widths.

I thought the bullish butterfly would perform better because of the general upward bias to equities over the last decade. I’d like to compare this to an ATM butterfly.

Other future directions include:

• Break down PnL by width
• MAE distribution
• Slippage analysis
• Break down PnL by Osc
• Categorize by Average IV
• Study effect of time stop
• Histogram of days in trade for winners (earlier exit, lower
  potential loss since T+0 maintains height over max loss)

The preliminary trade statistics did not record trade price, which I’m guessing is lower for the symmetric than the bullish IBF.

I haven’t dealt much with the differential margin requirement on each trade. What about widening the narrow structures in case that’s just leftover margin anyway?

Is there an issue with profit contribution when trading width-adjusted butterflies? The wider structures contribute more profit than the narrow ones. The narrow ones lose less because they are more diluted but they also return less in terms of ROI (in addition to gross).