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Market Measures

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Unrelated Movement Volatility

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.

Why does managing positions earlier reduce portfolio volatility?

Gamma risk is one answer. But to be more intuitive, we can look at how a stock moves over the course of a trade held to expiration versus how much a stock changes when the position is managed early.

We find that the stock moves (on average) a lot less over a 22 day period than a 45 day period. This translates to lower portfolio volatility because you are less exposed to directional movements.

Tune in as Tom and Tony expand on these takeaways.

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