Market Measures

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Diversification Options in High IV Rank

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.

Our technique of trading small and often lends itself to probabilities and playing a high probability game enough times so that we might see profits in the long run. However, this strategy is also built around product indifference and diversification.

Tom and Tony preach the importance of having diversified underlying markets in their portfolio amid their small and often trading before getting to a study on the subject. The guys look into high Implied Volatility environments for the stock market, and they look at how trading diversified markets like the Euro currency and Gold can help bolster profits in these volatile times.

The study looks at 1 standard deviation Strangles in the S&P 500, Euro, Gold, and Bonds. We filtered our results for those trading occurrences that happened when IV Rank was high in the S&P 500. Check out the results to see if diversifying helped or hurt profits when options prices rose.