Research On Volatility Arbitrage Strategy Based On Natural Rubber Options

At the beginning of 2019,the natural rubber option listed on the Shanghai Futures Exchange,as the world's first option targeting natural rubber futures,is of great significance to China's commodity options market.Although domestic scholars have drawn many valuable conclusions on the volatility arbitrage of stock index options,there are few in the field of commodity options,not to mention the natural rubber options that have been listed for less than one year,and the research on the volatility arbitrage strategy related to them is even blank.In addition,investors in China's options market prefer subjective experience judgment and fundamental analysis,and the restrictions of commodity options' trading system lead to a lack of trading strategies based on model prediction and stable returns.This paper hopes to analyze the contract characteristics of natural rubber options,build a suitable volatility arbitrage strategy to fill the gaps in China's research in this area,provide new strategic ideas for market investors,and make a contribution to the financial innovation in China's commodity options market.After analyzing the characteristics of natural rubber options theoretically,this paper chooses RUVIX(RU Volatility Index,RU is the natural rubber code)index and implied volatility in binary tree model to predict the volatility of natural rubber futures,constructs a top strangle strategy to carry out volatility arbitrage,and then makes a comprehensive analysis and comparison of arbitrage results from multiple angles,and finally gives conclusions and suggestions.The main research conclusions are as follows: First,the results show that both forecasting models can make the strategy obtain positive returns,and the arbitrage scheme in this paper has sufficient effectiveness.This shows that it is feasible to invest and trade natural rubber options based on the prediction results of the model without subjective experience judgment.At the same time,China should strengthen the education of option investors so that they can make judgments based on objective facts when trading options to avoid huge losses caused by blind operation.Secondly,after comparing the results of the top strangle strategy based on RUVIX index and the implied volatility of binary tree model,we find that the former has a positive but not high return rate and many stops during the holding period,while the latter has a considerable return rate and fewer stops.This shows that RUVIX index's ability to predict the volatility of natural rubber futures needs to be improved,which is slightly inferior to the implied volatility of binary tree model.Considering the great differences in the options market between China and the United States,this paper has done a lot of localization in compiling RUVIX index and combining the characteristics of natural rubber options,but the information reflected is still biased.Third,there are new findings in the details of the implementation of arbitrage strategy,such as the choice of the timing of opening positions and closing positions,the choice of option contracts and the choice of the holding period of the strategy.