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Mean Reversion in the Stock Market

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.

In this piece, Bat, Pete and Frank discuss mean reversion from its simple definition to its applications in trading and how consistent trading off those applications have been. They compare outright markets, pairs, and volatility to see which mean reverted the most. In general they find that Implied Volatility and Pairs are better for mean reversion trades.

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