Options

Volatility Arbitrage

Definition

Trading strategies that seek to profit from the difference between implied volatility (as priced into options) and the realized (historical) volatility of the underlying asset.

Example
Volatility arbitrageurs sell options when implied volatility is high relative to expected future realized volatility.
Related Terms
Arbitrage Implied Volatility (IV) IV Rank Volatility Index (VIX)
Frequently Asked Question
What is Volatility Arbitrage?
Volatility arbitrage profits from differences between implied and realized volatility. When IV is high vs. expected realized vol, sell options; when IV is low, buy options.
APA Citation
Clark, R. (2025). Volatility Arbitrage. VixShield Trading Glossary. Retrieved from https://www.vixshield.com/glossary/volatility-arbitrage
RC
Russell Clark, FNP-C
Author of SPX Mastery series · Founder of VixShield
Last updated:  ·  Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.