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A THREAD ON SHORT VOLATILITY STRATEGIES:
1) Short volatility strategies becomes an important part of institutional portfolios in recent years. They benefit from the "Volatility Risk Premium (VRP)", which is simply "Implied Volatility > Subsequent Realized Volatility".
1) Short volatility strategies becomes an important part of institutional portfolios in recent years. They benefit from the "Volatility Risk Premium (VRP)", which is simply "Implied Volatility > Subsequent Realized Volatility".
2) A very easy access to ideas related to VRP can be found in this excellent paper: naaim.org/wp-content/upl…
3) Short vol strategies may have high CAGR and sharpe but also have extreme negative skewness. This means that most of the time you earn significant returns, while you also have risk of rare blowups. See inverse VIX ETF blowup in "volmageddon" in 2018
