Variance Swaps

TheBigShort

TheBigShort

I am looking for a product that can replicate a variance swap. I want to trade realized vol vs implied vol for a given term. I can do this by selling a straddle on ES/SPX and delta hedging but that is to costly and my PnL will have a large variance. Trading VIX is just a play on forward vol so that won't work.

Ideas?
 
Theres an Short vol delta hedged ETN "XIVH". If you look at their graph tho they clearly were over levereged in febuary. I don't want a product like that.
 
Would shorting (or similar strategy) VXX approximate what you seek? More like playing the vol term slope at 60 days (term average of next two months VX futures).
 
stepandfetchit said:
Would shorting (or similar strategy) VXX approximate what you seek? More like playing the vol term slope at 60 days (term average of next two months VX futures).
More...
No. Shorting the VX is a play on forward vol. Thanks for your contribution tho
 
1) For replication -- the OTM strike-weights are inv-proportional to the square of the strike --something that should be marketable on an exchange as a play on realized vola rather than an IV term-structure.

2) It's a pure wager on stat-vol vs. a forward IV. There are no exchange products available (that trade), but a varswap is straightforward to replicate, albeit difficult (greeks).
 
You must log in or register to reply here.
Back
Top