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Volatility Traders Exploit Skew and Kurtosis for Alpha Generation
Volatility Traders Exploit Skew and Kurtosis for Alpha Generation
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BTCCSquare news:
Sophisticated derivatives practitioners are treating volatility as a standalone asset class rather than merely a risk metric. The focus has shifted from directional bets to exploiting structural discrepancies in the volatility surface.
At the Core of this strategy lies the volatility risk premium (VRP) - the persistent gap between implied and realized volatility. Market makers systematically overprice options to compensate for uncertainty, creating what amounts to a built-in edge for disciplined sellers.
The playbook requires mastery of options Greeks and volatility surface dynamics. Traders must navigate the complex interplay between THETA decay, vega exposure, and gamma scalping while managing tail risks.
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