Volatility as an Asset Class? Discussion Around Shorting Volatility Premium Using Credit Spreads

Broken Pie Chart

Welcome to the Broken Pie Chart Podcast Episode 3 Short Volatility. In this episode Derek Moore and guest Jay Pestrichelli discuss the emergence of short volatility strategies. How selling option premium with short put spreads and short call spreads can potentially generate income. With the low interest rate environment bonds are experiencing, will short volatility strategies start nudging fixed income’s place in many portfolio pie charts? We also discuss how sometimes the VIX Index is mistakenly thought of as the only way to play volatility and how VIX strategies differ from other short volatility strategies.

Key Takeaways:

• • What are short volatility strategies?
• • Selling put and call credit spreads to generate income.
• • Should short volatility strategies be part of portfolios given low bond interest rates?
• • What is the VIX index?
• • Why selling volatility premium doesn’t necessarily mean the VIX
• • Broad based index options
• • How do probability calculations factor into position?
• • Implied volatility as a proxy for expected market moves
• • Implied volatility versus historical volatility
• • Risks in selling option premium
• • How high probability options selling might handle various market conditions

Mentioned in this Episode:

Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

Buy and Hedge Book by Jay Pestrichelli and Wayne Ferbert https://amzn.to/2P3gw17