The Volatility Edge That Pays Premium Sellers 88% of the Time
Julia Spina and Jermal Chandler of tastylive Research analyzed ten years of SPY data from 2016 to August 2026, finding that implied volatility has consistently overstated realized volatility, providing a cushion for premium sellers. This edge has been widest in 2026, with implied volatility exceeding realized volatility 88% of the time, even though the year has not felt as volatile as the post-COVID period.
This consistent overstatement of implied volatility creates a reliable edge for premium sellers, allowing them to earn small, consistent profits by taking on tail risk, and understanding the dynamics of this edge is crucial for options traders.