If one had a reasonably accurate forecast of the variance of the price of some market security, such that one knows approximately what the price variance will be tomorrow, but not whether the price will go up or down or nowhere, is there a good way to profit from that knowledge? I know one could reduce risk exposure by avoiding the most variable days, but I am asking if there is any instrument or strategy that directly profits from a high or known variance.
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I'll preface this by saying that acting on material non public information is illegal (insider trading).
If you expect a big move but don't know in which direction, a straddle or strangle (long gamma/vega) is one way to play it.
Whether it's profitable depends on how much of it is already priced in and the subsequent IV (implied volatility) crush.
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