A VIX Short Call Ladder is an options trading strategy typically employed in traditional markets, involving selling one call option at a lower strike price, buying another call option at a higher strike, and simultaneously selling a third call option at an even higher strike. This strategy profits from a decline in volatility or a modest rise in the underlying index. In crypto institutional options trading, a similar “volatility short call ladder” structure could be constructed using options on crypto volatility indices or implied volatility measures for major digital assets, aiming to capitalize on expected decreases in market turbulence.
Mechanism
The mechanism involves the simultaneous execution of three distinct call option legs with the same expiration date but different strike prices. The initial short call provides premium income, while the long call above it acts as a hedge against moderate upward movement. The outermost short call, at the highest strike, aims to collect additional premium if volatility remains suppressed or falls. This creates a risk profile with limited upside profit and potentially unlimited downside risk if volatility rises significantly and the underlying asset or index surges beyond the highest strike.
Methodology
The strategic methodology centers on monetizing an outlook of decreasing or stable implied volatility, which is a common occurrence after periods of extreme market movement in crypto. Institutional options traders utilize this strategy to generate income from
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