Testing the Viability of Options Volatility Arbitrage Strategy in Real Market

As a matter of fact, the option is primarily used as a hedging tool for stock investment in recent years. Contemporarily, the underlying options now include almost all financial derivatives such as stock price, index, and exchange rate. With this in mind, the article will mainly discuss about the test for the volatility and profitability of option volatility arbitrage strategy in the options market. To be specific, a strategy is constructed to validate the feasibility for such strategy. According to the analysis, the limitations and strengths of the strategy will be analyzed through several indicators such as the Sharpe ratio, maximum return, and Calmar ratio. At the same time, one improvement will be made for the limitations of the strategy. In the meantime, the future development tools are proposed. Overall, these results shed light on guiding further exploration of option strategy designs and offer new insights for quantitative strategy designs.