Some of the best parts of trading are the ever-changing state of global markets and an atmosphere predicated on continuous learning.

With world events unfolding constantly, new securities hitting markets everyday, and shifts occurring in the relationships between asset classes - the 24/7 financial news cycle demands almost continuous attention.

Observing, discerning, and taking advantage of patterns that emerge from the chaos can therefore represent a key competitive advantage for investors.

A recent episode of Market Measures highlights some key findings by the tastytrade financial network that can help traders get a leg up on the competition.

Honing in on the theme of "velocity," this episode of Market Measures presents some findings that were unearthed through an examination of the relative velocity of equities, bonds, and crude oil in "fast-moving" markets.

In the equity options industry, it's generally accepted that downside puts are more expensive than upside calls because markets can theoretically crash at any moment.

The additional risk premium observed within downside put pricing is known as "skew."

Taking nothing for face value, Tom Sosnoff, Tony Battista and the rest of the tastytrade research team decided to crunch the numbers and provide more concrete evidence to back-up these common market perceptions.

The results are worth a long look, even if you're a grizzled veteran in the industry.

The study presented on Market Measures sought to analyze historical data in equities, bonds, and crude oil to evaluate the magnitude of down-moves versus up-moves across the three asset classes.

Consequently, using data from 2003 to present, the study compared the magnitude of moves in 10-day and 30-day periods for the following products:

  • S&P 500 (/ES)
  • 30-Year Treasury Bonds (/ZB)
  • Crude Oil (/CL)

As expected, the data did support the notion that down moves in equity products tend to be of greater magnitude than up-moves, as demonstrated in the graphic below:


Not surprisingly, the findings in the 30-year Treasury Bonds also confirm the enhanced magnitude of down-moves in equity markets.

Bonds tend to move in the opposite direction of equities - therefore, we would expect that in the case of bonds, there would be more pronounced up-moves as compared to down-moves.

The chart below shows that since 2003 this has indeed been the case - sharp down-moves in equities are typically accompanied by sharp up-moves in bonds:


As you can see in the slide above, the largest up-moves in bonds were twice their largest decrease (flight to quality).

While the research above confirms the generally accepted principle of markets crashing harder down than up, the historical data from crude oil reveals some additional insight.

Based on historical data in /CL, commodities don't follow the same correlation framework as stocks and bonds.

In fact, tastytrade research shows the /CL is about 3x more volatile in daily movement than equities. Furthermore, the data suggests that crude oil in particular experiences bigger up-moves than down-moves... the exact opposite situation as equities.

The /CL findings are shown below:


The tastytrade research team conducted additional research on /ES, /ZB, and /CL that further confirmed the tendencies of each product during high-velocity market moves through the respective cost of upside and downside protection. Pricing data from all three products clearly indicates that downside puts are more expensive in the /ES, while upside calls are richer in /CL.

We invite you to watch the full episode of Market Measures focusing on the velocity in markets when your schedule allows.

If you have any questions or comments on the subject please don’t hesitate to contact us at

Happy Trading!

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.