volatility trade
Volatility and derivatives?
When an institutional trader says, "We've been" short volatility "," what mean? What Would trade instruments for taking positions on volatility? How it works Spock – Yes it does and I think I understand, but may have to read a few more times:) great answer, thanks:) Why is that people do not understand the question of insisting on an answer really make sense? Thanks Nick Z.
good question let volatility define in operational terms as the 14 day moving average of real amplitude, which is less true today's high-end low today, plus the amount of any difference between today's range y. yesterday, the long volatility means betting that volatility will increase in the future. It does so by buying both calls and puts on the market [extends the long term if the number of puts and calls are equal]. Then you go short volatility with the sale of both puts and calls into the market [or short straddles, etc.] *** since there are four or five components that make up the price of a and one option is perceived volatility, they are short [who wrote and sold] Options and reduces volatility, then the value of options decreases. buying again, and made a profit. Does this help?
Stefen Choy on Defining Using Implied Volatility to Trade FX Options 1
