Percent Moves Lie. Here's How to Compare Any Two Stocks Fairly.

A ten dollar move in a low-priced stock and a ten dollar move in an expensive one are not the same thing, and Tom Preston argues that switching to percentages does not fix it either, because percentages ignore volatility. His preferred measure is how many standard deviations a stock has travelled, which puts wildly different names on one common scale. In his words, it turns apples, grapes and pears into oranges. The method is simple enough to keep in a spreadsheet. Pull the implied volatility reading off the chart for the date you care about, scale that annual figure down to the stretch you are measuring using the square root of the trading days involved, then multiply by the closing price on that date to get a one standard deviation move. Divide the actual price change by that number and you have a comparable answer. As he says on air, none of this is a trade recommendation, and never take more risk than you are comfortable with. 📊 tastylive: https://www.tastylive.com/ 📰 Get Tom's pre-market analysis every morning: https://www.tastylive.com/newsletters 📘 FREE Options Strategy Guide: https://tinyurl.com/bp9ms763 📱 Follow tastylive on X: https://x.com/tastyliveshow Chapters 00:00 Measuring moves in standard deviations 00:32 Where the volatility number comes from 01:10 Pulling past volatility off the chart 02:40 The formula, step by step 03:36 Why he counts trading days 04:27 Turning it into a dollar move 05:01 Comparing it to the actual change 05:54 Apples, grapes and pears into oranges 06:19 Putting it in a spreadsheet #tastylive #optionstrading #standarddeviation #impliedvolatility #tompreston #cherrybomb #optionsmath #volatility #tradingbasics #optionseducation tastylive is a real financial network, producing hours of live programming every day. Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade. With over 120 original segments, and over 25 personalities, we'll help you take your trading to the next level, whether you are new to trading or a seasoned veteran. tastylive content is created, produced, and provided solely by tastylive, Inc. ("tastylive") and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read all applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange Traded Options Risk Disclosure Statement found at https://tastytrade.com/disclosures/. Past performance is not indicative of future results. Performance is not presented net of all commissions, fees, and expenses. Multi-leg option strategies incur higher transaction costs than single leg trades as they involve multiple commission charges. Examples provided are for illustrative, informational, and educational purposes only and are not intended to be reflective of results you can expect to achieve. Supporting documentation for any claims, including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.