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Julia Spina Says You’re Selling Way Too Wide, and the Data Proves It
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ticker lesson
Breakdown
0:00lesson
Expected range approximation using implied volatility
- Expected move calculated using implied volatility as rough estimate
- Expected range scaled over different time frames
- Expected range usually bigger than realized moves
- Compare actual moves across futures assets
1:49BTC· ticker
Bitcoin futures stay inside expected range 91% of time
- Bitcoin futures stay inside expected range 91% of time
- Crude oil data quality issues with 100% inside range
- Bitcoin and crude oil have inflated IV due to volatility
- Investors expect Bitcoin to be volatile
3:40lesson
Expected range accuracy over different time horizons
- Expected range becomes more reliable with longer time frames
- Longer time horizon leads to wider range
- 5-day expected range captures more realized moves
- 1-day vs 90-day options show different results
5:26lesson
Markets typically use 50-60% of expected move
- Markets use 50-60% of expected move in realized values
- Full range is wider than median realized move
- Crude oil data issues noted
- Choosing strikes requires nuanced risk management
7:04lesson
Upside and downside breach rates across markets
- Most markets show balanced upside/downside breaches
- Metals show more upside breaches
- Breaches not necessarily directional
- Gold has trust issues due to extreme moves
8:47lesson
Capturing 90% of observed moves requires wider ranges
- 90% of moves require 1.7-1.8x expected move for metals
- ES needs 1.3x expected move for 90% capture
- Tails can be asymmetric and not captured well by standard deviation
- Expected move metrics vary by asset class
10:43lesson
Equity index futures show favorable capture rates
- Equity index futures show 77% one-day containment
- Equities have predictable events like earnings
- Sector ETFs reduce idiosyncratic risk
- Expected range less accurate for single company names
12:31lesson
Expected move assumptions vary by market
- Most futures contain 70-80% of 1-day moves
- Expected range calculated using IVX approximation
- Median realized movement is 50-60% of expected move
- Tail risk requires wider ranges for metals
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