When the market does unusual things, people often expect it to return to its old behavior. Many trading strategies based on this assumption go under the banner of "mean reversion," but that is often confused with the statistical fact of "regression to the mean." Today, Jacob joins Tom and Tony to untangle these topics, examine what sort of reversions we can actually expect to happen and which would violate the efficient market hypothesis, and identify what aspects of high IV actually make it a good opportunity for tastytraders.
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