Luke Browne, Head of Investment Specialists from UBS Investment Solutions and Natasha Jhunjhunwala, Executive Director of Equity Derivatives Structuring at Goldman Sachs teamed up for a session titled Timing Considerations for Short Volatility Strategies today at RMC just outside of London

Browne started things out talking about the differences in realized, implied and expected volatility before diving into the focus areas of volatility trading.  He touched on taking advantage of implied volatility being overpriced relative to realized volatility in addition to discussions around trading changes in the steepness of the volatility smile and curve roll down trading which is commonly executed through VIX calendar spreads. 

Natasha Jhunjhunwala followed up with her section subtitled the “The Devil is in the Details” which is a reference to execution timing risk that accompanies just about any strategy.  She noted how close to close volatility is consistently higher than intraday to intraday volatility.  Of great interest was also her depiction of the VIX term structure noting the extra volatility associated with trading the front month future when compared to farther dated contracts.  As she stated, there is extra risk relative to the return associated with short volatility strategies at different parts of the curve.