Most traders take a directional bet on one stock. A pairs trade lets you bet on the relationship between two stocks instead. When two highly correlated assets diverge, you get long the one that sold off and short the one that ripped, and wait for them to converge back. The catch is in the sizing. You cannot just buy a hundred shares of each. SPY and IWM have completely different stock prices and implied volatilities, so you have to adjust for both before the trade is actually neutral. Mike and Ryan walk through the full calculation live, including the notional value adjustment, the IV adjustment, and the final contract ratio. Examples across ETFs, bank stocks, and airline names. Helpful links: tastylive: tastylive.com Get Tom's pre-market analysis every morning: tastylive.com/newsletters FREE Options Strategy Guide: tinyurl.com/bp9ms763 Follow tastylive on X: x.com/tastyliveshow CHAPTERS: 00:00 What Is Pairs Trading and Why Does It Work? 00:44 Correlat...