Understanding Volatility Risk Premium (VRP) & Squeeze Risk
A complete guide to screening implied volatility vs. realized volatility anomalies to identify high-probability option selling strategies.
What is the Volatility Risk Premium (VRP)?
Options markets consistently overprice anticipated future volatility relative to actual historical price movement. The gap between Implied Volatility (IV) and Realized Historical Volatility (HV) is known as the Volatility Risk Premium.
How Market Scanners Identify Mispriced Premiums
By screening stocks where IV trades at a significant premium to 30-day realized volatility, traders can locate credit spread and iron condor setups where premium decay is statistically skewed in their favor.
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