Volatility of Volatility

Here’s an interesting post about volatility of volatility.

Volatility of Volatility as an Edge

I’ve done some research myself on the subject and can confirm the results, which appear to be isolated to the performance of calls. That is, call options on stocks where the historical volatility of the one-month at-the-money implied volatility is low (1 in the chart) perform better than the call options on stocks where the historical volatility of the one-month at-the-money implied volatility is high (10 in the chart).

The papers cited in the article make no mention of the performance of puts or straddles. My guess is because they came to the same conclusion that I did, which is that there is no edge.

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