What benefit is predicting volatility?

Discussion in 'Strategy Building' started by pursuit, Sep 10, 2017.

  1. pursuit

    pursuit

    If I know what realized (as opposed to implied) volatility will be in the future what benefit does that provide to me?
     
  2. Similar to knowing winning PowerBall numbers in advance! -- For ultra conservatives, you know how much hedge is appropriate (worth big bucks, as well).
     
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  3. henry76

    henry76

    More than hedging you can take mkt neutral option positions to make what is more or less a straight bet for or against increase /decrease in volatility.( As long as your prediction differs from the current implied mkt price for volatility)
     
  4. ...uhhh....just a little, unimportant thing called...Money, o_O

    The most valuable commodity I know of...is information.
    You either have a trading edge, or you might as well step on the ledge.
    [​IMG]
    No one can 100% Predict the Future. -- but you can atleast manage it, and/or go and flow with it,
    Bend the variables or whatever expectations of the game slightly in your favor, if you can,
     
    Last edited: Sep 10, 2017
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  5. pursuit

    pursuit

    what if I can only take directional bets on the underlying?
     
  6. dunno the answer to your question BUT I'd like to ask you, if you are good in predicting realized vol, why would you choose to take directional bets only on the asset. Why not use other instruments that fit your ability? There are traders out there that are good in direction, others in magnitude of movement,etc and they put on options positions to take advantage of their "edge" Why limit yourself?
     
  7. Probably waste of time, besides opportunities! :D
     
  8. lindq

    lindq

    Volatility equates to movement.

    You might as well ask, "Why does it help me to know the future amount of movement in an instrument or index?"

    First, it helps you to know whether or not to even engage in the instrument. And second, to what extent? Position sizing. And third, with what risk protection in place.
     
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  9. JackRab

    JackRab

    VIX, but who cares really... since you can't predict future realized vol because that's not possible.

    Oh, and if you're thinking about realized vol will go up because earnings... meh... everyone knows that... nothing interesting there.... can't trade on it since that info is already known to the markets.
     
  10. henry76

    henry76

    What is VIX?
     
    #10     Sep 11, 2017