# @tastyliveshow on YouTube - **Type:** Video - **Original URL:** https://youtube.com/watch?v=_cg5R3CBxOw - **Gondola URL:** https://gondola.cc/posts/66127333-tastyliveshow-youtube - **Thumbnail:** https://img.gondola.cc/tr:w-,h-,fo-auto/postThumbnails/db1e0214ce.jpg - **Posted:** 2026-05-30T13:00:06.000+00:00 - **Account Owner:** tastylive (@tastyliveshow) — https://gondola.cc/tastyliveshow ## Caption 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: https://www.tastylive.com/ Get Tom's pre-market analysis every morning: tastylive.com/newsletters FREE Options Strategy Guide: https://tinyurl.com/bp9ms763 Follow tastylive on X: https://x.com/tastyliveshow CHAPTERS: 00:00 What Is Pairs Trading and Why Does It Work? 00:44 Correlation Is the Requirement: 0.75 to 1.0 01:43 SPY vs IWM: Current 90-Day Correlation at 0.96 02:33 When to Enter: Playing the Divergence 04:00 Size Up in Low IV, Size Down in High IV 05:24 Reduce Risk by Trading a Spread Instead of Shares 06:00 Correlated Pairs: Banks, Airlines, ETFs, Metals 08:53 Calculating Notional Value: Stock Price Times 100 09:47 Adjusting for Implied Volatility to Match Both Sides 11:08 Finding the Contract Ratio: SPY to IWM Is 1 to 2 12:20 Using Options Instead of Shares: The Simpler Path 13:31 Final Takeaways: Divergence, Convergence, Right Sizing #optionsjive #optionstrading #pairstrading #optionsforbeginners #howtotradeoptions #tradingstrategy #spyoptions #stockmarket #tastylive 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. ## Stats - **Views:** 1,130 - **Likes:** 37 - **Shares:** 0 - **Comments:** 1 ## Tags spyoptions, tastylive, optionstrading, stockmarket, howtotradeoptions, optionsjive, tradingstrategy, pairstrading, optionsforbeginners --- Copyright (c) Gondola