Volatility Transitions to a Higher Regime


While option writing has increased in popularity over the past several years, the strategy has been in use for decades. Although the approaches to option writing vary widely, the goal for virtually all option writing strategies is the same: capture the persistent volatility risk premium embedded in options. 

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"The vast majority of market environments are supportive of option writing strategies. The primary exception tends to be years such as 2018 where the market did not re-price risk efficiently enough as volatility trends increased. Years like 2018 are necessary to allow the volatility risk premium to continue to exist, and should lay a solid foundation for volatility risk premiums going forward."

Shawn Gibson - Chief Investment Officer