Mean Reversion
Definition
The statistical theory that asset prices, volatility, and returns eventually revert back toward their long-term historical average after periods of extreme deviation in either direction.
Example
Mean reversion traders bet on overextended prices returning to normal — e.g., buying oversold stocks after extreme drops.
Related Terms
Frequently Asked Question
What is Mean Reversion?
Mean reversion holds that prices and volatility tend to revert to their historical average over time. Strategies include buying oversold assets and selling overbought ones. VIX is a classic mean-reverting asset.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.