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Market Measures

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Positive Drift

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 the short-term trade, we usually assume that the market would randomly move up or move down. However, long-term market behavior tends to be positive.

In the last 10 years, the average daily market return is 0.05%, which is significantly higher than the average daily market return since 1950, which is 0.03%.

This difference implies an abnormally wide spread between average daily market drift and risk-free rate in the last ten years. The only way to normalize the abnormality of this spread is an interest rate increase or market decrease.

Tune in as Tom and Tony weigh this information and attempt to formulate trades around it.

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