What Is Volatility Arbitrage?

　　 Volatility arbitrage It is a forecast volatility that attempts to make use of the future price of an asset. Assets There is a difference between the implied volatility of options and a trading strategy for profit. Since the pricing of options depends on the volatility of their underlying asset prices, if the predicted volatility of the asset price is inconsistent with the implied volatility of the option, the expected price of the option will be in line with its actual price. market There are differences between prices.

The volatility arbitrage strategy is usually achieved through the establishment of a neutral hedging portfolio consisting of options and underlying assets. Buy an option while selling its underlying assets. This portfolio is equivalent to multiple volatility. If it is finally confirmed that the underlying volatility of the underlying assets is higher than the implied volatility of the trading period, then the strategy will be profitable. Instead, selling an option while buying its underlying assets is equivalent to shorting the volatility. If the underlying volatility of the underlying assets is ultimately lower than the implied volatility of options, then this strategy will be profitable.