The practice of employing trading strategies specifically designed to profit from anticipated or observed fluctuations in the price of cryptocurrency assets, rather than solely from their directional movement. This often involves options or volatility derivatives.
Mechanism
Achieved through strategies like selling options (short straddles/strangles) in low-volatility environments or buying them (long straddles/strangles) when high volatility is expected. Quantitative models predict future price variance and inform optimal entry and exit points for these positions.
Methodology
Requires sophisticated risk management to handle rapid price changes and significant market events. Traders monitor implied and realized volatility metrics, adjusting positions dynamically through rebalancing or hedging, aiming to capture premiums from volatility forecasts while controlling potential losses.
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