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Similar
to …
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The
profit/loss profile of VolContract futures is linear.
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VolContract futures
will be cash settled, the same as cash-settled futures.
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The
Realized-Volatility Period for VolContract futures and the delivery
month for commodities will be periods during which VolContract futures
and futures, respectively, cease to function as purely anticipatory
vehicles.
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Potentially,
options could be traded on VolContract futures.
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VolContract futures
have an underlying such as a physical asset, security,
or a futures contract.
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Typically,
VolContract futures expire at the same time as the corresponding
options (this allows option market-makers the closest
possible hedging vehicle).
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Dissimilar
to …
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VolContract futures
do not settle to a spot price or some index value. Rather, the expiration value is derived
from many daily closing prices of the underlying futures
contract or asset price.
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The
value of VolContract futures is based on a calculation over
a specific time frame, not just on one final price at expiration.
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The
performance bond of VolContract futures may be different for long
and short positions.
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VolContract futures do not have a strike price.
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While
a standard option’s expiration value is based on the underlying’s
price on the day of expiration, VolContract futures are based
on the returns of the underlying over many days. In a way,
the VolContract futures expiration value is similar to that
of an exotic option known as an Asian option (or average-rate
option), traded in over-the-counter markets, where the final
settlement price is determined by averaging several intermediate
settlement prices.
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VolContract futures have no sensitivities — delta, gamma,
theta, kappa (vega), or rho.
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