• Zura Kakushadze
  • Juan Andrés Serur


This chapter discusses trading strategies that treat volatility as an asset class. Volatility bets can be made using options on the underlying instruments, but also via futures and options on volatility indexes such as VIX and other related vehicles such as exchange-traded notes (ETNs) that track them. The chapter discusses, including detailed mathematical descriptions, trading strategies based on VIX futures basis, volatility carry strategies using two ETNs or one ETN hedged with VIX futures, strategies based on the volatility risk premium whereby implied volatility tends to be higher than realized volatility most of the time, which can be exploited by selling straddles based on S&P 500 options and using Gamma-hedging to maintain Delta-neutrality, strategies based on volatility skew whereby with all else being equal put options tend to be priced higher than call options, which can be exploited via long risk reversal, and volatility trading using variance swaps instead of options, which allows to avoid the need for Delta-hedging.


Serial regression Volatility index VIX Exchange-traded note (ETN) VIX futures basis Volatility carry Volatility risk premium Implied volatility Realized volatility Straddles S&P 500 options Gamma-hedging Delta-neutrality Volatility skew Long risk reversal Volatility trading Variance swaps Delta-hedging Backwardation Contango Roll loss Hedge ratio Gamma scalping Vega Theta 


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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Zura Kakushadze
    • 1
  • Juan Andrés Serur
    • 2
  1. 1.Quantigic Solutions LLCStamfordUSA
  2. 2.Universidad del CEMABuenos AiresArgentina

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