### Understanding Volatility Trading Strategies

**August 8, 2016** - Equity Options, Volatility Effects

What are the principal strategies for exploiting the volatility and volatility skew risk premiums? In his May 2016 workshop presentation package entitled “Volatility Modelling and Trading”, Artur Sepp provides an overview of systematic volatility risk premium capture strategies. He focuses on simple rule-based strategies with monthly reformation suitable for an investable index or a proprietary strategy. He covers delta-hedged strategies for capturing the volatility/volatility skew risk premiums (straddles/strangles) and buy-write and put-write options strategies as applied to major stock indexes and liquid exchange-traded funds (ETF). He covers the following strategy elements:

- Measuring realized volatility.
- Forecasting expected volatility.
- Measuring and forecasting implied and realized volatility skew.
- Computing option delta.
- Trading off transaction costs versus delta risk.
- Managing tail risk.

Using relevant data for target assets during January 2005 through January 2016, *he finds that:* Keep Reading