Sports Markets

Darren Rovell joins Tom Sosnoff for a virtual fireside chat on sports betting & trading.

Watch Now

Market Measures

Monday – Friday | 9:00 – 9:20a CT

The Effect of IV on ROC

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.

Potential return on capital is a metric that tells traders how much opportunity is available in a particular trade. Since implied volatility is also a measure of opportunity, how are the two metrics correlated?

  • SPY, 2005-present
  • 45 DTE, 16 delta strangles (puts and calls)
  • Recorded the potential return on capital (credit divided by buying power)
  • Recorded VIX

We find that implied volatility and return on capital are highly correlated and you can get around 2.5x as much ROC in a high IV environment compared to a low IV environment.

Market Measures More installments

See All »

Latest tastytrade Videos As of August 10

Most Shared From the last 30 days