Exposing Retail to Realized vol

[TheBigShort]

Why are there no ETFs or closed ended funds that give retail exposure to a delta hedged straddle or a replicated variance swap? I would imagine something like this would be a hit. A delta hedged put strategy would also make a lot of sense. This would be a great way to give investors exposure to realized vol

There must be a specific reason for why this has not been created. I'd love to hear your input.

What do you guys think about taking this on as an entrepreneurial endeavor?

 

[PoopyDeek]

The var-futures never had any volume.

Alpha would be a factor in any dynamically-hedged synthetic. I can't imagine being able to sell that to regulators. Basically, you need to be an established BD to make this work. ETF underwriting is a NIGHTMARE.

 

[ajacobson]

Don't know if this will help you any but these guys actually built a CME listed realized vol. product and have one pending to trade on the SEC side at BOX.

https://www.realvol.com/


They also own a lot of IP relative to product construction. The CME products were delisted and BOX has said something like it needs a liquid future to attract MM talent.

Robert Krause is the CEO and a brilliant guy.

Much longer story, but this might give you a starting point. Former CME product was SPY based as is the proposed BOX product - if the BOX approval has not lapsed. Indicies are on Bloomberg so a sense of price discovery does exist.

 

[newwurldmn]

Why are there no ETFs or closed ended funds that give retail exposure to a delta hedged straddle or a replicated variance swap? I would imagine something like this would be a hit. A delta hedged put strategy would also make a lot of sense. This would be a great way to give investors exposure to realized vol

There must be a specific reason for why this has not been created. I'd love to hear your input.

What do you guys think about taking this on as an entrepreneurial endeavor?

I think it would be impossible without caps on the varswaps. I asked a private bank to quote me 5 year variance (when it was trading over 32) and they wouldn’t do it without a cap (and that made the whole deal prohibitive).

 

[ajacobson]

A great deal can depend on your balance sheet as well as their appetite. Either try another desk or ask them how large a balance sheet they need.

 

[PoopyDeek]

I think it would be impossible without caps on the varswaps. I asked a private bank to quote me 5 year variance (when it was trading over 32) and they wouldn’t do it without a cap (and that made the whole deal prohibitive).

*gamma swap

 

[PoopyDeek]