Derek Wang, Founder & CEO of Bell Curve Capital, has total 16 years of experiences in option trading and quantitative research. Derek worked at Peak6, Ronin Capital, and Capstone Investments, some of the top firms in the option trading industry. Derek was awarded a PhD in Physics from the University of Pennsylvania (1992).
Volatility trading is an investment strategy based on the statistical relationship of derivatives with their underlying assets, a relationship which is mathematically rigorous yet nonlinear and complex. Such trading operation requires substantial quantitative support, and a sophisticate technological system for management. Traditionally, most of the academic research on volatility has been focusing on the valuation theory with various distribution models. Such research may be intellectually interesting, but in practice there are much more relevant quantitative elements than valuation models. I will give an overview of what equity volatility trading is in practice. We will walk through the lifetime of a trade from the idea selection, execution, hedging, position management, risk management, and realization of profit and loss. Variation of volatility trading strategies will be discussed. Also we will have an overview of the topics of quantitative research that is most crucial to trading, strategy development and risk management.