Volatility Arbitrage
Trading mispricing between implied and realized vol
What is Volatility Arbitrage?
Volatility Arbitrage A trading strategy that seeks to profit from the difference between implied volatility (priced by options) and the trader's forecast of future realized volatility. Typically involves buying options when IV is below expected realized vol, or selling when IV is above. Delta hedging isolates the pure volatility bet.
Complete Definition
A trading strategy that seeks to profit from the difference between implied volatility (priced by options) and the trader's forecast of future realized volatility. Typically involves buying options when IV is below expected realized vol, or selling when IV is above. Delta hedging isolates the pure volatility bet.
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