The S&P 500 is a market cap weighted index consisting of 500 stocks. Can we trade individual stocks' implied volatility and outperform just selling SPY IV?Study:
Sold 45 DTE, 16Strangles in AAPL, MSFT, GOOG, and AMZN
Created portfolio with 25% weighting to each single stock and compared to 100% SPY
P/L as % of capital requirement
all trades at 50% of credit received
2010 to present
Ultimately, the tastytrade Research Department finds that there is no advantage of trading the higher IV individual stocks in the S&P compared to just selling the SPY options. We trade single stocks when their IV Rank is high or their trade opportunity looks more attractive than broad market indexes, but trading a portfolio of stocks with high IV does not outperform trading an ETF without taking on additional risk.