7 Hidden Tricks to Master Extreme Volatility in OTC vs. Exchange-Traded Derivatives
Derivatives remain indispensable for financial professionals managing risk, speculating, or hedging. The divergence in performance hinges on understanding structural differences between Exchange-Traded Derivatives (ETD) and Over-the-Counter (OTC) markets. ETD markets, with their transparency and liquidity, favor high-frequency quantitative strategies targeting volatility surfaces and curves. OTC markets, by contrast, excel in customization, enabling precision strategies to mitigate operational and basis risks.
The seven advanced techniques outlined here—ranging from volatility skew arbitrage in ETD options to VIX term structure exploitation—highlight how professionals navigate these markets. Mastery lies in dynamically shifting between ETD's quantitative edge and OTC's surgical precision.
