Hi all, I just read Ron's post about the need to more community participation to improve the quality of discussions and learning, and felt compelled to initiate a discussion about "Defining Your Edge" as it relates to the common campaign style strategies that many people in this community trade. Not sure what the etiquette is as it relates to these types of discussions, so please excuse me if I am delving into secret sauce territory that people prefer to be hush-hush about. So to begin, I am a big believer in needing to thoroughly understand and have the ability to define your edge to be a successful trader. Otherwise, you run the risk of continuing a particular trade or style once your edge is gone. Maybe a particular trade works in a high skew regime but not when the skews are flatter. If you know this, you can scale back or adjust the trade when the skews flatten, as opposed to continuing to trade through the regime change none the wiser as to the reasons for your lower profitability. With that said, I'm hoping to solicit some input or have someone point me in the right direction regarding the edge in a Bearish Butterfly campaign. I could spend many hours thinking this through on my own, but am hopeful that others may share their insights. Below are my initial thoughts on the edge in such a strategy: (1) IV historically trades at a premium to realized volatility. This would seem to be a source of edge for any premium selling strategy. (2) Short-Term Mean Reverting tendency of markets. Being negative gamma, short-term mean reversion helps you capture the theta in the trade if in fact the mean-reversion materializes. Also, the martingale nature of the campaign also benefits from mean reversion. (3) Skew. I haven't quite worked this out completely, but I suspect that the skewness of the markets contributes to your edge in such a strategy. You are buying an ITM put at a lower IV than the puts your are selling (good!) but also buying an OTM put at a higher IV (bad, but how bad?). I need to think more about the how the slope and curvature of the Vol term structure would affect your profitability in this trade. Some natural extensions of this discussion would revolve around how to identify similar conditions in other markets that would tip you off to a trading opportunity. If you can define your edge, you can fold in more markets where the same edge exists, and remove markets as the edge disappears. Is there reason to believe that the Vol term structure, IV v. HV relationship, or mean-reverting tendency of RUT versus SPX would cause it to be a better market to trade? What about other markets that have experienced prolonged trends and where the future risk/return profile looks asymmetric? Just some food for thought to kick off a discussion. Sorry for the long-winded post and all the digressions.