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5feira
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Volatility Trading using European Vanilla Options

October 14th, 2017, 5:58 pm

What do you think is the best model for trading volatility using only European Vanilla Options and the underlying? And why?
 
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list1
Posts: 1696
Joined: July 22nd, 2015, 2:12 pm

Re: Volatility Trading using European Vanilla Options

October 14th, 2017, 11:53 pm

What do you think is the best model for trading volatility using only European Vanilla Options and the underlying? And why?
Trading does not a formal environment and a good trading idea today might not be a good idea tomorrow. Hence it might be not a perfect idea to talk about 'the best'. For a few approaches it might make sense to keep historical data of your heuristic trades based on different approaches. They also possible might be taking in different moments of time.
 
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frolloos
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Joined: September 27th, 2007, 5:29 pm
Location: Netherlands

Re: Volatility Trading using European Vanilla Options

October 15th, 2017, 6:52 pm

What do you think is the best model for trading volatility using only European Vanilla Options and the underlying? And why?
Volatility comes in several flavours. Which one do you want to buy or sell?
 
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Orbit
Posts: 492
Joined: October 14th, 2003, 5:34 pm

Re: Volatility Trading using European Vanilla Options

December 19th, 2017, 6:57 pm

What do you think is the best model for trading volatility using only European Vanilla Options and the underlying? And why?
I think it depends on what you mean by "model." If you mean a description of volatility and ts representative "vega" on vanilla Europeans then I would say plain old Black-Scholes. It provides a perfectly facile description of vega.
A skew model such as Heston might have a tenuous link to "vega," which is a B-S concept anyways.
My 2 cents
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