Institutional investors often build complex three-dimensional maps that relate implied volatility to calendar information and price of the underlying security.
Distortions and anomalies in these maps represent trading opportunities in the form of mispriced volatility.
Overnight (close-to-open), intraday (open-to-close), and traditional (close-to-close) measures of volatility can vary dramatically. These differences can be used to identify mispriced options and structure statistically advantaged trades.
Volatility distortions sometimes vary by weekday. These calendar effects can help time entry and exit points for certain types of short-term trades.