Put volatility minus call volatility
✓ aliveSmileSlopeOther· Options data
Using OptionMetrics's daily volatility surfaces (vsurfd), keep last observation each month, delta = 0.50 or -0.50, and days to expiration = 30. The signal is then the difference between put implied vol and call implied vol.
IS Sharpe (1996–2010)
2.392
+18.6% p.a.
OOS Sharpe (2011–2023)
1.696
+10.8% p.a.
Sharpe decay
+29.1%
(IS − OOS) / |IS|
IS vol
7.8%
annualized
Cumulative return (last 40 years, monthly)
+5273%1996-022023-01
Publication details
AuthorsYan
PaperYan (2011)
JournalJournal of Financial Economics
Publication year2011
Original sample1996–2005
IS T-statistic8.17
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