Can separating by market cap give us an edge with IV overstatement?
In short, no. Regardless of market cap, IV overstatement is the same for most stocks averaging around 7-9%.
Implied Volatility Rank is truly the great equalizer when comparing implied volatility across stocks of different size or any differing markets.
While smaller stocks do tend to show higher implied volatilities, they also move slightly more than their larger counterparts creating no “edge” in the size of a given stock.
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