Implied Volatility Trading Strategy for Commodity Futures
April 17, 2017 - Commodity Futures, Volatility Effects
Is option-implied volatility a useful predictor of returns for commodity futures? In her March 2017 paper entitled “Commodity Option Implied Volatilities and the Expected Futures Returns”, Lin Gao tests the power of option-implied volatilities (with 12-month detrending) for commodities to predict commodity futures returns. Specifically, she each month buys (sells) the fourth of commodities with the lowest (highest)… Keep Reading