Capturing Upward-only Volatility

[StefanM]

Hi everyone

Is there any research out there on whether its possible to capture upward only volatility? Or to put it another way, is there a way to limit only downward volatility whilst capturing upward volatility?

Thanks

[Frank1 Grossmann]

There is a way to capture upward volatility by using options to construct for example a SP500 equity long position. For example now as volatility is low you can construct a calendar spread with a positive Vega. When volatility is high, then you can change your strategy and sell a put option right away so that you profit from falling volatility.

[StefanM]

Thanks Frank, I’ll look into this approach.

[Author]

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