The Opposed Piston Two-Stroke (OPTS) engine has many advantages on power density, fuel tolerance, fuel flexibility and package space. A type of self-balanced opposed-piston folded-crank train two-stroke engine for Unmanned Aerial Vehicle (UAV) was studied in this paper. AVL BOOST was used for the thermodynamic simulation. It was a quasi-steady, filling-and-emptying flow analysis -- no intake or exhaust dynamics were simulated. The results were validated against experimental data. The effects of high altitude environment on engine performance have been investigated. Moreover, the matching between the engine and turbocharger was designed and optimized for different altitude levels. The results indicated that, while the altitude is above 6000m, a multi-stage turbocharged engine system need to be considered and optimized for the UAV.