Among the trading techniques used are statistical arbitrage between stock exchanges and indices. “The key component is arbitrage. As long as mispricing occurs in index options, the process can deliver significant returns,” Clarke said.

The strategy draws from a universe of options derived from indices, rather than stocks, since indice-derived options are not affected by company-specific events and tend to be more liquid, readily priced and host a larger range of strike prices and expiries.

The strategy does not usually assume directional views on volatility, but it may do so during periods of extremely high or low market turbulence. It did not undertake a major directional play during January, Clarke said.