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Market Measures

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Dependence of Outliers

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.

Market moves are generally seen as independent from one another. Although that is true for small moves (less than 1% in magnitude), larger moves tend to not be independent.

In other words, if a large move (greater than 2% in magnitude) is observed on any given day, there is a greater chance to see another large move tomorrow than the chance of seeing a large move on any given market day.

In fact, if we have a 5% move today, it is 37 times more likely to see another 5% move the next day than a 5% move on any given market day.

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