In the October edition of "Futures & Options Trader" magazine there's an article entitled "Testing A 'double-butterfly' System" on the SPX. The test was conducted by the folks at OptionVue for a 5 year period. There were 69 trades, with an 81% win record. It appears that many of the trades were "managed/adjusted" prior to expiration, as the avg. hold time per winning and losing trade was 11 days and 14 days, respectively. The winning trades earned $945.52 on avg, while the avg loser was $1,714.23. The total return over the 5.5+ years was 154%, with an annualized return on capital of 27.2% per year.
Needless to say, 2008 was an extremely volatile year, which is not best for a range bound strategy, such as the butterfly. Nonetheless, looking at their equity curve, 2008 was quite profitable; however, 2009 has not been profitable, as the total return dropped from about 175% down to 154%. The trend in the S&P since March has been extreme (almost unprecedented).
I suppose that the annualized avg return on capital of 27.2% would have been materially higher if the test was done on the ES options, as it allows for more leverage.
Personally, I believe that the BWB is a better strategy... Although it is more risky, it gives a "better bang for the buck"...
Walt
Needless to say, 2008 was an extremely volatile year, which is not best for a range bound strategy, such as the butterfly. Nonetheless, looking at their equity curve, 2008 was quite profitable; however, 2009 has not been profitable, as the total return dropped from about 175% down to 154%. The trend in the S&P since March has been extreme (almost unprecedented).
I suppose that the annualized avg return on capital of 27.2% would have been materially higher if the test was done on the ES options, as it allows for more leverage.
Personally, I believe that the BWB is a better strategy... Although it is more risky, it gives a "better bang for the buck"...
Walt
