I would tend to agree that volatility strategies are capital inefficient. It used to be that there was a lot of edge in typical vol strategies but most of it went away when market access improved and computation costs came down.
Taken to the n'th degree, does that mean the future is zero volatility and perfect efficiency in markets with zero spread ?
When you say forward vol. Do you mean future implied vol? Because realized vol would hurt a calendar spread
newwurld. Right now AAPL front month has really low vol against the DJX. The spread is at the lower bound. How can I go about trading this if I think there will be an increase in the spread. Should I buy a calendar on AAPL and sell a calendar on DJX?
GOOGL also has low volatility - might be lower than AAPL. GOOGL is also well below its all time high - while AAPL is close to its all time high. IMO ..... GOOGL has more upside than AAPL.
Agree. Today yes, a month ago, no. Timing is everything. By the way, your long OTM strategy is very interesting, again, timing is important?
Careful with that axe, Eugene. It depends on the time window one uses to measure the correlation. The shorter the time frame, the more that the correlation flips--goes positive for short periods of time. These have historically marked good interim turning point s in the markets, and might be used as a basis for putting on your strategy.