Options Jive

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Seasonality in Equities & Implied Volatility

Options Jive

When we talk seasonality in trading, we are talking about whether or not a market has historically risen and fallen at specific times of the calendar year.

Today, we test if there is a seasonality effect in the broad equity market and the implied volatility (IV) market on equities.

The question for today’s Options Jive comes from the fact that the S&P 500 IV Index (VIX) has historically traded higher around this time of year. Has this potential seasonality in VIX translated to moves in the S&P 500 or losses in short options trades in this market?

Tom and Tony demonstrate that the S&P 500 has not showed any sustained tendencies at this point in the calendar year. They then go on to show the success rates for 1 standard deviation (or 16 delta) Strangles relative to the month in the year. These results saw great consistency regardless of the time of year. Check out the entire segment above for a summary of seasonality and how it might affect short options trades in the S&P 500.

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