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Market Measures

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Consecutive Up Days

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Selling calls is one way to fade consecutive up moves despite the fact that in the up markets, implied volatilities will typically decrease, which lead to the possible decrease of option premium.

According to our study in 30 delta, 45 DTE calls on SPY, the more consecutive up days we have before placing our orders, the fewer occurrences we have. And with more consecutive up days before entering, we will typically get lower implied volatilities.

However, the short call will have the best performance with highest average P/L and winning rate when there are 6 consecutive up days before placing the trade.

So we can see that waiting for appropriate consecutive up days can help us to improve the performance of our short positions at a cost of lower occurrences, and traders may want to put aside buying power to capitalize on these types of events.

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