The general rationale is that if yesterdays close price is higher than the day before's, then this morning should see an increase in volatility (panic/insurance/hedging).
Similarly, if yesterdays close price is higher than the day before's, but the price after market open is was lower this morning, and the current price is less than 1% higher than yesterdays close price, we can assume that volatility will decrease (hence short). Note shorting only happens on Thurs and Fri.
The above is a summary, but you can easily read through the code to see the exact details - there is no complex maths with matrix transformations etc like most other quant algos. I like KISS :)