Market Measures

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The S&P 500 on Steroids

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.

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, 16 delta Strangles in AAPL, MSFT, GOOG, and AMZN

  • Created portfolio with 25% weighting to each single stock and compared to 100% SPY Strangles

  • P/L as % of capital requirement

  • Managed 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.

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