A Guide on Strategies for Volatility Trading: A Conceptual Overview

Authors

  • Luisa Tibiletti Department of Management, University of Torino, Corso Unione Sovietica 218 bis, 10134 Torino, Italy.
  • Gian Marco Mongiovi ESG Analyst, Arwin & Partners, Via Mario Pagano 54, 20145, Milan, Italy.
  • Massimo Giorgini Department of Management, University of Torino, Corso Unione Sovietica 218 bis, 10134 Torino, Italy.

DOI:

https://doi.org/10.9734/bpi/nramcs/v6/2951B

Keywords:

Marketplace volatility, CBOE VIX, volatility trading

Abstract

This document addresses volatility trading for investors seeking excess returns by shorting derivatives during periods of stability. Firstly, we introduce the notion of historical and implied volatility. Secondly, we discuss the use of the S&P 500-based CBOE VIX index, the leading benchmark index to measure the market’s expectation of future volatility. CBOE VIX is also known as the "fear gauge index", because it tends to rise in bearish stock market environments and to fall or remain steady during bullish ones. Next, we discuss the most popular trading strategies based on  options, variance swaps and futures. Empirical studies complement the conceptual debate.

Published

2022-07-21

How to Cite

Luisa Tibiletti, Gian Marco Mongiovi, & Massimo Giorgini. (2022). A Guide on Strategies for Volatility Trading: A Conceptual Overview. Novel Research Aspects in Mathematical and Computer Science Vol. 6, 27–56. https://doi.org/10.9734/bpi/nramcs/v6/2951B

Issue

Novel Research Aspects in Mathematical and Computer Science Vol. 6

Section

Chapters