This chart compares The Volatility Exchange’s RealVol futures with
VIX futures, volatility and variance swaps, and delta-neutral
hedging.
|
Features
|
RealVol Options
(realized volatility)
|
VIX®
Options
(implied volatility)
|
Volatility
& Variance Swaps
(realized volatility)
|
Delta-Neutral
Hedging
(realized volatility)
|
|
Expires
to actual, or realized, volatility or variance
|
|
X
Expires to a forecast
|
|
?
Path dependency does not provide "pure" volatility
exposure
|
|
Appeals
to retail traders
|
|
X
Difficult to
understand
|
X
No access
|
X
Too complicated
|
|
Appeals
to option market-makers
|
|
X
Not a good
options hedge
|
?
May be difficult to
execute quickly and
at favorable prices
|
|
|
Appeals
to investment banks and institutions
|
|
X
Not a good hedge for
banks' volatility exposure
|
|
|
|
Appeals
to portfolio managers
|
|
X
No exposure to
actual price movement
|
?
Losses can be extreme
for variance swaps
|
X
Requires constant monitoring
|
|
Exchange-cleared
(regulated with no credit risk)
|
|
|
X
Subject to credit risk
|
|
|
Difficult to
manipulate market
|
|
X
Special opening quote at
expiration that depends
on liquidity
|
|
|
|
Transparency
and price discovery
|
|
|
X
No public quote
|
|
|
Could
be traded on all assets
|
|
X
Only on very liquid
option markets
|
?
Typically traded
only in large size
|
|
|
Easy
to calculate
|
|
X
Formula is complex |
|
X
Calculation requires
execution prices and commissions for each
transaction
|
|
Execution
costs low
|
|
|
?
No direct expense, but
execution cost built
into market quote
|
X
Market spreads and commissions on all legs
and follow-up trades
|
