Is it possible for retail investor to trade Variance Swaps and how could it be done? I've checked lot of data about volatility/variance trading and some of those sources often compare spot VIX and VIX futures to Variance Swaps(and Volatility Swaps). Thing is, there isn't much information on how to trade those Variance Swaps. Does anyone have any clue?
Is it possible for retail investor to trade Variance Swaps
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Trade VX futures or the VIX vol-synthetic. I don't think you're going to be happy with the contango.
Variance futures come probably closest for retail. But I have not checked whether they still exist and at what volume they trade. Not sure of liquidity at all.
I knew we are missing something from this market and now I know what it is! Let's have retail traders trade variance! What could go wrong?
What's the point of this comment, can't you already trade variance by VIX futures, ETN's or various options strategies?
What do you mean by "vol synthetic"? ETN's like VXX, SP500 call/put spreads that are made to replicate VIX movements or something else?
Variance futures are totally illiquid, there are literally 0 volume or open interest there. It was CBOEs attempt at capturing that market that failed miserably because they could not come up with better margin methodology. There is no strategy that would allow you to trade variance via ETNs.
You can reproduce a variance swap payoffs either by trading complete replicating strip of options (and delta-hedging it MoCC, which is easier now) or by trading a package of VIX futures (or synthetics, as @destriero suggested - that's more margin efficient), VIX options and a strip of S&P options to replicate the stub.
PS. for full disclosure, I do trade variance swaps (though I have not done any since last spring when it was very exciting place to be) and don't think retail traders should be involved there