Weekly Iron Butterfly Backtest (Part 25)

In this blog series, I’m backtesting the weekly option trade described here.

Week 24′s trade begins with this:

The market rallied in the afternoon to an adjustment point:

Soon after, the trade hit max loss of 12.9% on max margin of $4,857:

The trade was down $486 before the adjustment and $522 afterward.  While slippage is a reality of trading, perhaps I should not have adjusted with max loss being $560?  The adjustment did cut net position delta from -38 to -7.  Taking into account delta only (gamma was slightly higher in the non-adjustment case), the following table shows projected P/L with and without adjustment:

Basically this trade is damned if I do and damned if I don’t.  Adjustment gave the trade farther to run before hitting max loss, which was hit anyway.

The trade is now 13-11 in 24 weeks.