Volatility Strategies — Options and Structured Product Scoring
ACI scores volatility strategy providers on strategy design, counterparty quality, execution infrastructure, track record, and transparency, with convexity and IV regime adjustments.
TL;DR
ACI scores volatility strategy providers on strategy design, counterparty quality, execution infrastructure, track record, and transparency, with convexity and IV regime adjustments.
Why This Exists
Volatility strategies generate yield by selling optionality. The income looks stable until a tail event reveals the hidden risk. Two strategies with identical yields can have radically different risk profiles depending on their convexity.
How It Works
Base Score = (Strategy Design x 0.30) + (Counterparty Quality x 0.25) + (Execution x 0.20) + (Track Record x 0.15) + (Transparency x 0.10)
Two modifiers adjust the base:
Convexity Adjustment: -5 to +5 points based on return shape
IV Regime Adjustment: score x 0.90 when implied volatility is HIGH (above 80th percentile)
What You See in the Platform
Volatility providers show composite score, convexity indicator (concave/linear/convex), current IV regime (LOW/MID/HIGH), and maximum historical drawdown.
Where to Go Next
Read Reading an ACI Score for full breakdown, or Convexity for return shape analysis.
Next up
Reading an ACI Score — Full Breakdown
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