Compravendita di volatilità con straddles sintetici

Traditional investors take a view on the asset price direction, then construct their strategy. There is another dimension to investment, trading the asset (return) volatility. Its simplest form involves the use of an option and the underlying to create a synthetic straddle. Volatility players bet on volatility after having estimated future realized volatility and formulated expectations on implied volatility behaviour (considering the state of the market to determine if the implied volatility under examination is at an extreme level or not). We are not going to trade either realized or implied volatility directly. We are trading the spread between the two, by combining a standard European index option with the underlying, in the US market. Under certain conditions, this yield a profit ignoring the direction of the underlying price.