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Reading Options Market Talk: Well-Bid Volatility and Fading a Trade

Article Quant Q&A · Author: A.L. Verminburger
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Summary

The document defines two expressions used in options and trading conversations. Saying volatility is well bid describes strong buying interest in options that are particularly sensitive to implied volatility, with longer-dated options given as an example because of their higher vega. The phrase refers to demand in the options market, rather than directly asserting that realized volatility is high.

To fade a trade is to take a position against the trade or refrain from following it, based on skepticism about its prospects. The answer suggests that a trader might interpret a sharp move as temporary institutional buying and expect it to reverse. This is a brief vocabulary explanation, not a defined signal or systematic strategy: it offers no criteria for identifying temporary flows, timing an opposing position, or managing the risk if the move continues.

Key ideas

  • Well-bid volatility refers to buying demand for options with high sensitivity to implied volatility.
  • Long-dated options are an example of options that can carry substantial vega.
  • Fading a trade means opposing or declining to follow a trade that the trader doubts.
  • A temporary buying surge is offered as one possible reason to fade, not as a reliable signal.

Tags

OptionsVolatilityMarket microstructure
Full text
# Vocabulary: "Well Bid" and "Fading" Meaning?


# Vocabulary: "Well Bid" and "Fading" Meaning?












I think it is important quants understand what traders are talking about. With that, what does it mean:

- "vol is well bid"

- "fade the trade"

?

## Answer by Si Chen (score 1)

https://quant.stackexchange.com/a/69130

"vol is well bid" - lots of buyers options with high vega (price sensitivity to implied volatility), such as long dated options

"fade the trade" - means the person doesn't believe it's a good trade to get in on. Maybe a temporary spike due to some institutional buying.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.