Comparison to Existing Products

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


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