Market Measures

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Rate of IV Contraction

Market Measures

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Tom and Tony discuss how soon we can expect implied volatility to contract when it is at certain elevated levels.

We find three takeaways:

  • IV is mean reverting and eventually will contact if it is above its mean.
  • It takes roughly 2 to 3, 45 day cycles for IV to contract 20% on average.
  • The higher the implied volatility is, the faster it contacts.

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