Market Measures

IVR and IVP: The Numbers

| Aug 30, 2016
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    Market Measures

    IVR and IVP: The Numbers

    Aug 30, 2016

    The Market Measures from August 16, 2016, “IV Rank and IV Percentile Visualized” helped our understanding of selling premium relative to Implied Volatility Rank (IVR) and IV Percentile (IVP) using visualization techniques. What though, do the actual hard numbers such as win rate and P/L, tell us about these Implied Volatility (IV) measures?

    Our study was conducted in the S&P 500 (SPX), Russell 2000 (RUT) and Gold ETF (GLD) using data from 2005 to the present in SPX and RUT and from 2009 to the present in GLD. We collected data every 5 days for occurrences. We sold the 1 Standard Deviation (SD) Strangles, those with a Delta for the Put and Call of 16, in each of the different underlyings. We sorted for all situations, high IVR results (above 50) and high IV Percentile results (above 50).

    Three basically identical tables displayed the results for the SPX, RUT and GLD. Each provided the numbers for the win rate, top 25 percentile P/L, median P/L, bottom 25 percentile P/L and the largest loss broken down for all occurrences, those with an IVR above 50 and those with an IVP above 50. Waiting for high IVR in SPX significantly raised each P/L metric although the win rate dropped slightly. The RUT table showed similar results although to a lesser degree and the high IVR had the highest win rate. The results table for GLD showed that waiting for high IVR or high IVP was superior but there was not much difference between the two in the P/L metrics, IVR had a significantly less largest loss.

    For more information on IVR and IVP see:

    Watch this segment of Market Measures with Tom Sosnoff and Tony Battista for the valuable takeaways and the results of our study comparing waiting for high IVR or high IVP to all IV environments.

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