For traders that felt disappointed by the 2017 trading year, and perhaps the associated trading results, a new episode of Market Measures may help you reset in 2018.

The focus of the show is to illustrate how depressed volatility got in 2017, by comparing it to the first quarter of 2018. The data included in this installment of Market Measures is sure to provide you with a broadened perspective on the current trading year, in the context of previous years.

As you can see in the charts below, the intraday range in the S&P 500 and the average daily value of implied volatility have both increased substantially in 2018 as compared to 2017. This is exciting, because traders can now access two-sided markets - as opposed to a long, slow grind higher:

Two-Sided Trading
The Return of Two-Sided Trading

The data above probably confirms what you've already observed - ranges are wider in 2018 and implied volatility is on average higher - at least thus far in 2018.

Now let's widen the lens even further and look at 2018 compared to some of the more volatile periods in history. Going back to 2011 and 2008 on the charts above, one can see that ranges in the S&P 500 and averages in implied volatility were even higher than current levels. Information that helps us better conceptualize current trading conditions.

While it may seem like equities have become unhinged, the reality is that 2008-2009 was a lot more treacherous (so far). Practically speaking, that means that we may have arrived at a critical inflection point.

Going forward, markets could unhinge further, or they could calm down and trade with relative tranquility once again, as observed in 2017. In such conditions, it's usually advisable to trade nimble, and to trade the best opportunities from both sides (short and long premium); without concentrating risk too heavily in your portfolio.

No matter which way markets go from here, you can always sell more premium once they've arrived there. The key is not to get overextended in the interim.

We hope you'll take the time to review the complete episode of Market Measures focusing on the current trading environment when your schedule allows.

If you have any questions that you want to run by the tastytrade team, don't hesitate to leave a message in the space below, or reach out directly at support@tastytrade.com.

We look forward to hearing from you!


Sage Anderson has an extensive background trading equity derivatives and managing volatility-based portfolios. He has traded hundreds of thousands of contracts across the spectrum of industries in the single-stock universe.


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