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 in both underlyings
- Managed at 25%
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.