Volatility Library

Article by: John W. Labuszewski
Published by: CME Group
Date: 8 Jul 2010

“Volatility is one of several key inputs into mathematical option on futures pricing models along with market price, strike price, term until expiration and short-term interest rates. While market price movements exert the most obvious impact upon the option premium, volatility remains a very important factor. So much so that many traders strive to predict future levels of volatility and engage in socalled ‘volatility plays’ as a result.

“Traders may ‘buy volatility’ generally by buying options; or, ‘sell volatility’ by selling options, often in concert with the placement of a hedge in the futures market structured by reference to the net delta associated of the option positions.

“This report represents an update of volatility through the 2nd quarter 2010″

Full article (PDF): Link

Edited by Annie Walsh, Chief Marketing Officer, Orc Software
Published by: Futures and Options World
Date: Sep 2008

“The jury’s in. The recent rise in volatility trading within the capital markets, prompting further trading development in this area, will result in even greater numbers of trading firms, worldwide, expanding their global use of volatility trading strategies. While volatility as an asset class has been the subject of debate in certain circles for at least the past five to ten years, it has very recently received more heightened media and industry attention and scrutiny.

“The subject has spawned much academic research. Back in May 2006, the Financial Times was writing about why volatility would become an asset class. More recently, Emmanuel Bourdeix, Credit Agricole Asset Management’s head of derivatives and convertibles said: “volatility should be considered as an equity sector in its own right alongside financials, industrials and mining stocks.”

Full article (PDF): Link