Market Measures

Monday – Friday | 9:00 – 9:20a CT

Correlation in Short Volatility

Market Measures

Correlation is always changing and positions can be more correlated than we suspect. We can even have positions that are correlated even though the underlyings for these positions are uncorrelated.

Study
  • 2008-Present, SPY and USO
  • 45 DTE
  • Short ATM Straddle in both underlyings
  • Managed at 25%
Results

We see that when volatility is low, these two positions have a weak correlation to each other but when volatility picks up, these positions tend to show a much stronger correlation. We look to put positions on in higher IV, but this means putting on positions that are more correlated to one another.

Market Measures More installments

See All »

Latest tastytrade Videos As of July 21

Most Shared From the last 30 days