single name variance risk premium
What it checks
When option-implied volatility is much higher than recently realized, options are expensive. Stock tends to drift up as the fear premium burns off.
Mechanism
Single-name variance risk premium = atm_iv^2 - hv_20^2 (annualized). Positions revert when option-implied variance is rich vs realized.
Signal rule
long when VRP 252d z >= +1.0; short on z <= -1.0; hold 10/21/42d
Data dependencies
options_chain_dailyEnd-of-day OPRA option chains used by IV-skew family.
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
Expected edge
- Paper alpha
- ~5-8%/yr
- Paper Sharpe
- ~0.7
- Paper window
- T+1 to T+42d
Bali-Hovakimian 2009: ~5-8%/yr cross-section long-short VRP sort.
Example tickers where this is likely to fire
Illustrative only, the signal fires based on the live data, not a fixed list.
Related families
option iv skew driftOptionsPut-side IV smile steepness (sotm_iv - sitm_iv) z over 252d. Rising skew prices tail risk; reverts via underlying drift up.
vvix regime long equityMacroVVIX (the VIX of VIX) spike vs trailing 252d z-score signals vol-of-vol overpricing. Mean reverts via broad-equity drift up over 5-21d.
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