Mean Reversion Trading – Part 3 | The Long & The Short Ep.18

Welcome to The Long & The Short – a show where you can expect an honest take on trading, something you won’t hear elsewhere. I’m your host, Sandeep Rao (SEBI Registered Research Analyst – INH000013059). In this final episode of the Mean Reversion series (Part 3), we move beyond price and focus on volatility as a core non-price market feature, breaking down what volatility really means, how it is measured, the differences between Historical, Implied, and Realised Volatility, how India VIX works, and why volatility itself often mean-reverts, while also exploring why short volatility strategies perform better in certain regimes, why fully rules-based systems are difficult to build, and how institutions use valuation and relative relationships to complete the full picture of mean reversion as a trading and investing framework. 📌 Chapters: 00:00 Intro: Wrapping Up The Series 01:25 What Is Volatility? Two Faces Of Market Movement 02:20 Measuring Volatility: Range vs Close-To-Close 04:07 Understanding Historical Volatility (HV) 06:05 Implied Volatility (IV) & Option Pricing 08:52 Analyzing the India VIX Chart 10:01 Practical Use of Volatility Mean Reversion 11:08 Fundamental Mean Reversion & CAPE Ratio 12:08 Final Summary & Key Takeaways 🔗 Resources & Links: 1. Measuring Historic Volatility → https://dynamiproject.wordpress.com/w... 2. Understanding the 'Rule of 16' in Plain Terms → https://www.optionseducation.org/news... 3. Aswath Damodaran – Market Valuations & Mean Reversion →    • Mean Reversion: Statistical Fact or Danger...   4. Mean Reversion as a Market Force →https://johncbogle.com/speeches/JCB_M... 📹 Related Episodes: 1. Seven Years of the 9:20 Straddle – Past, Present, and Future →    • Seven Years of the 9:20 Straddle – Past, P...   If you prefer reading, we've written a post about this episode here: https://inthemoneybyzerodha.substack.... Do check out our newsletter "Aftermarket Report" where we do a quick daily wrap-up of what happened in the markets, both in India and globally here: https://aftermarketreport.substack.com/ Check out Varsity Live, a hands-on way to learn finance with experts. Instead of only listening, you practice in real time through activities like personal finance planning, technical charting, balance sheet analysis, and more: https://varsitylive.zerodha.com/home Disclaimer: Investments in securities are subject to market risks. Please read all related documents carefully before investing. SEBI registration does not guarantee the performance of the intermediary or assure returns to investors. The securities mentioned are for illustrative purposes only and do not constitute a recommendation. By proceeding, you acknowledge and agree that any returns shown on this platform are solely for informational purposes. They are not intended to serve as advertisements or promotional material, nor should they influence your investment decisions. Trading and investment decisions should be made at your own discretion, and it is strongly advised to consult a qualified financial advisor before acting on any information provided. Note: Some image(s) may have been created using Al, no copyright infringement is intended. About Zerodha At Zerodha, we simplify complex financial topics to empower you with the knowledge to make smarter investment choices. Whether you're just getting started or looking to sharpen your skills, we’re here to help you navigate the financial world with clarity.