The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Is volatility a good measure of risk?” We’ve recently actually said in our covered calls paper when we were writing up the research that volatility is but one side of a two-sided coin. There’s returns in our opinion and then there’s volatility and those are the two sides of the coin that you should be aware of as a trader. Volatility is just one way to measure risk. It should not be the only way to measure risk. It should be looked at in conjunction with a bunch of other risk metrics like win rate, returns, sharp ratios, ortina(?) ratios, calma(?) ratios, etcetera. It’s another way to measure risk. But generally, even though something has high volatility, means that it just moves a lot, that’s all it means. It means that it just moves a lot. As long as you’re compensated for that movement, it should generally be acceptable. Now, if you’re looking at two different investments,