Market Measures

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Overstated Implied Volatility in Stocks

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.

We talk about options all day, but what is the primary function behind whether or not buying or selling options can turn into profits? Today’s Market Measure segment answers that question with a show of how options strategies are tied to movement in the markets.

Tom and Tony walk through how short options trades profit from a lack of movement, and vice versa for long options strategies. Then, the guys show off a recent study committed by the Research Team that uses five stock indexes and five single stock examples to show which side of options trading has been historically profitable.

They compare implied volatility and its implied moves to actual historical movement in the market to show that short options strategies have been the most historically profitable. The details are all present in the above segment. Check it out for some greater context.