tasty Extras

What Was Expected vs What Occurred?

tasty Extras

We believe in premium selling because our studies and experience have proven to us that Implied Volatility (IV) overstates the actual move. That move can be easily calculated, especially if you have a research team like ours to do the work. We can arrive with a 1 standard deviation expectation of price range using an option’s implied volatility; meaning with a 68% probability, the market is expecting prices to fall within the computed range.

Dr. Data and our research team provided a series of charts with the expected move and actual move for the SPY (S&P 500 ETF), IWM (Russell 2000 ETF), TLT (Bond/30 Year Treasury ETF), GLD (Gold ETF), /CL (Crude Oil Futures), XLV (Healthcare ETF) and EWW (Mexican Stock Index ETF). Tom and Tony commented on how the S&P 500 and Gold had stayed within their expected ranges and how the Bonds had moved out of its expected range (-4.10). "This was your Home Run, your Superbowl for binary events. This was the most unexpected move with a Volatility crush." It was an excellent demonstration of the virtues of selling high IV, IV Rank and of “staying small”.

For more information on the Presidential Elections see:

Watch this tasty Extra with Tom Sosnoff and Tony Battista for a review of what the markets were predicting and what actually happened.

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