DIEM Strategy Talk: Implied Volatility and New-Trade Selection by The DIEM Team

DIEM Strategy seeks to profit from the passage of time – and less by picking direction. IV can provide "an edge."

Implied Volatility ("IV") in Euro has been dropping steadily from its late November peak eight weeks ago. Low IV’s in this and other markets means DIEM Strategy must wait on the sidelines.

As evident in recent issues, DIEM clients have been increasingly "under-invested" for many weeks. This is the result of 1) existing trades winding down favorably, and 2) new opportunities becoming hard to find.

This situation occurs naturally from time-to-time - especially for a rules-guided strategy like DIEM. With current market exposures so low, this is a good time to review the important role Implied Volatility ("IV") plays in DIEM Strategy’s new-trade selection.

Lower Implied Volatilities

The above chart shows how Euro IV has been falling. Indeed, this chart is typical of the situation in other ..... CLICK HERE to read the complete article.