Implicitly selling volatility

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From Archive 11 December 2003

By PWM Editor

Active investor trading has brought about changes in the foreign exchange options market, leading to the revival of older – but still useful – concepts.
Over the past couple of years, drastic changes have taken place in how private investors view and influence the foreign exchange options market. It has gradually become a far better environment in which to control risk.
Specifically in FX, the options market used to be a buyer’s market. Big market-making houses were generally short vega (at-the-money options) and short volgamma (out-of-the-money options). This has changed and there is a direct and a more indirect reason for this revision.

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Implicitly selling volatility

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