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Volatility Risk Premium (VRP) Strategy [WIP]

Category: Quantitative Research
Date: June 2025
Chart showcasing volatility capture from FX options

About this project

A multi-market strategy capturing the volatility risk premium across Spot FX, Futures (6E, 6J), and Options on FX Futures using 20–10 delta bull/bear spreads. Entry is trend-filtered via the 200-day moving average, and coded in Python using historical data fetched from IBKR. Work-in-progress extensions include macro event triggers and multi-asset overlays (Gold, CHF, VIX).

Key Features

  • Multi-Asset Backtesting: Runs on Spot FX, Futures, and Options instruments with synchronized logic.
  • 20–10 Delta Option Spread: Implements bull put and bear call spreads based on option delta slices.
  • 200-Day Trend Filter: Determines bullish or bearish macro regime for strategy entry.
  • Volatility Risk Premium Alpha: Harvests premium from option sellers by maintaining defined risk.

Challenges

Building an event-driven backtester, aligning option chain dates, and integrating macro filters.

Learnings

Deepened understanding of derivatives greeks, macro-volatility interplay, and options structuring.