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Market Measures

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ETFs and 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.

This segment of Market Measures compares trading ETFs versus individual stocks.

When picking a trade we typically consider the liquidity, recent price action, implied volatility, and potential market-moving catalysts of the underlyings.

While ETF implied volatility is typically lower than stock implied volatility, ETF implied volatility has been historically overstated more often than stocks. Also, tail risk and outlier moves are much more prevalent for stocks than ETFs.

Therefore, ETFs provide us with opportunity to trade with less tail risk.

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