VOL24 MathWorks Volatility Trading

An index ETF and a call and a put at the same strike trade together. The options price the ETF's volatility.

Objective

Take a view on volatility and trade it. Assessed on profit and loss.

What it shows

• Volatility as something priced: the call and the put together are a bet on how far the ETF moves.
• A straddle as the simplest volatility position.
• Whether the options are dear or cheap against how the ETF actually moves.

Watch out for

• Buying the straddle and watching time take the value away.
• Mistaking a direction view for a volatility view.
• The options' delta moving the position's value when only volatility was meant to be traded.

Who takes part

• Trader — every student. Trades ETF, an index ETF, and C50 and P50, a call and a put at 50.

Class size

Ten to forty students in one role. The options are priced by the class.