Market Measures

Monday – Friday | 9:00 – 9:20a CT

VIX: Cluster, Pop, Revert!

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.

Unlike stocks, volatility products move in a distinct way based on their underlying math equation. Based on this formula, VIX tends to cluster at low levels, pop aggressively to the upside, then revert back to its average. Given this reversion to the mean, does it make sense to sell strangles in SPY after varying percent increases in VIX?

The Study:
  • SPY
  • 45 Days to Expiration
  • 20 Delta Strangles
  • Held to Expiration
  • Sold Strangles after Varying % Increases in VIX. We Measure % Increases as the Daily Change in VIX Closing Prices
Results:

It pays to sell strangles after volatility pops. Even though there are fewer trade occurrences waiting for VIX to spike, strangles see larger average P&L and similar standard deviations of P&L to selling in all VIX environments.

Market Measures More installments

See All »

Latest tastytrade Videos As of May 21

Most Shared From the last 30 days