Volatility Arbitrage funds try to make money by exploiting changes in the volatility (how far the value of something moves up and down over a period of time) of an asset. One way of doing this is to construct a delta neutral portfolio by selling / buying an underlying security and buying / selling an option on that security. The portfolio won’t change in value when the price of the underlying security changes (this is the delta neutral bit) but it will change in value if the option price changes in response to a change in the volatility of the price of the underlying security.
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