Short Volatility

Short volatility is a strategy where a trader sells options to collect premium, betting that the actual volatility of the underlying asset will be lower than what is implied by the market. By selling options, the trader gains from both the collection of premium and the passage of time.

However, this strategy carries significant risk, as an unexpected spike in volatility can lead to large losses. Short volatility strategies are common among professional market participants who seek to earn yield in stable or ranging markets.

In crypto, short volatility can be highly profitable during periods of consolidation, but traders must be prepared for the inherent risk of extreme volatility events. Risk management is paramount when engaging in short volatility trades.