Long Volatility

Abstract

Investors are used to the term ‘long’. They may be long shares, long bonds or long index futures, in the sense that they have purchased them. But it is rather more difficult to grasp the concept of what it really means to be long of volatility, since it is intangible. This is the subject matter of the next section. In this chapter we address the course of action which is taken by a large group of investors globally to take advantage of opportunities when convertibles do not trade at a ‘fair’ level.