Simulate a VarSwap with the Options Strip

Discussion in 'Options' started by newwurldmn, Feb 1, 2018.

  1. newwurldmn


    I'm trying to mimic a varswap using the listed strip for trading purposes.

    Anyone have a good rule of thumb to simulate a varswap position using the listed strip. It's impractical to trade the whole strip. Just trading the 20 delta option will give you a reasonable level for the vol but not for a tradable structure.

    What's a reasonable middle ground? For example, what if I sold the 10, 30, 50 70 delta (from the put side) options in the appropriate ratios? Or more simply just sold the 30 and 70 delta options on a ratio?
  2. samuel11


  3. tommcginnis


    Nicely done, you guys.

    (Sorry, but it's too rare to have a simple question, and then collaborative answers. Wish we had an "Applause" emoji. Heh!)
  4. fixed that for you
    tommcginnis likes this.
  5. newwurldmn


    That's Sam and aquarians.

    I will check out those papers. Do you know of a decent approximation for a varswap if I wanted to create the exposure synthetically with the listed strip trading the fewest number of lines possible?
  6. tommcginnis


    Now THAT made my Friday. Jeez, Louise.......


    ((AND YOU CAN CUT&PASTE THEM!! {At least the "hands"} Cool!))

    I need to live a bigger life....:rolleyes: