A weekly thread to discuss financial matters - from personal all the way up to global.
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Notes -
It's not possible to make such a trade be profitable because betting on volatility increasing has a carry cost.
But going to cash is probably the best bet, but there is no upside either.
Do you think you could give me a specific example of this? Thanks.
Like I said below, it's possible to (almost) replicate a variance swap. If not on the Nasdaq because of liquidity, then almost certainly on the S&P. But if you do not know how to manage theta, doing this type of thing is not for you. Even the banks messed up their structured variance products in '08. There is very serious execution risk, even if your hypothesis is correct. You can also create other, even more cursed structures, but then you run into tracking error. And the Greeks don't go away.
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