Time until expiration and volatility of an option go hand in hand. In theory when time decrease it can be made up for in an increase in volatility, and visa versa.

In today's study, we take a deeper look into how this relationship plays out, and if it is indeed a balanced scale.

As a result of the highly volatile moves of this selloff, many premium sellers experienced significant losses; however, how often can traders expect this to happen?

Tom and Tony discuss some of the worst losses option traders can expect from short strangle positions, and how likely they are to occur.

We find that short premium positions tend to have infrequent, but substantial losses and are much more likely to have small, but high probability positive returns.

The term “risk” is one of the most vaguely defined concepts in finance. There are many ways to quantify it depending on many factors.

In this Market Measures, tastytrade shows how to control for three main risk factors associated with trading options.

The ability to incrementally adjust the risk of a trade makes options trading extremely versatile. The risk of a strangle for example can be defined and turned into an Iron Condor. Risk can then be adjusted in $1 increments.

When we define the risk what are things to keep in mind:

• The range of the POP profile given a delta changes
• How the width of a spread can be adjusted to fit risk preferences
• How changing delta ultimately affects risk

Join the guys in today’s segment where they consider the various ways to incrementally adjust risk.

tastytrade always throws around the term “standard deviation”. But what does it really mean?

The Research Team dives deep into this concept and provides context around this move in 2020 compared to other moves in history including 2008.

Options are used as a form of insurance, and their prices tend to increase in periods of high market uncertainty.

However other factors, such as the price of the underlying, also contribute significantly to option prices.

Today we discuss the correlation between option prices and the price of the underlying on days with large market movements, and how it might differ from our intuition.

A well thought out set of decisions is vital to staying mechanical and can greatly increase your probability of success.

Decision making in trading doesn’t have to be a gut decision. We can not only put rules we can use probabilities as well.

Tom and Tony walk through a few ways tastytrade aims to ease decisions when setting up positions and managing a portfolio.

The 2020 Selloff has been the most rapid selloff in the 21st century, which resulted in large losses for directionally-neutral premium sellers.

tastytrade discusses how strangles of various deltas have performed in different types of selloffs compared to the long term average, and the types of losses to expect in selloffs of different velocities.

One problem with extremely high delta is potential Buying Power Expansion. If something happens to the naked positions, the BP expansion can reduce the capital availability and potentially triggers a margin call. Today, Tom and Tony explain this by using historical data.

Volatility is arguably the single most important metric in trading.

To quantify risk, we will look to the volatility index, The VIX.

Currently, the VIX is exceptionally high trading over 40.

Today, we take a look at what this actually means things we should look for and things we might want to avoid.