In volatility trading, traders try to make profits by speculating on changes in the volatility of the securities they trade, instead of their direction. Depending on the strategy, volatility traders make profits when the volatility increases, decreases or stays flat.
Traditionally, volatility trading requires investing in the options market by buying and selling options. For example, a volatility trader can establish an at-the-money straddle (a put and a call option at the same strike price) position to gain exposure to volatility. The strategy doesn't care which direction the market or the underlying security moves. The position becomes profitable only when the implied volatility of the underlying security increases.
