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Similar
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The
profit/loss profile of RealVol futures is linear.
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RealVol futures
will be cash settled, the same as cash-settled futures.
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The
RealVol calculation period (CP) for RealVol futures and the delivery
month for commodities will be periods during which RealVol futures
and futures, respectively, cease to function as purely anticipatory
vehicles.
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Potentially,
options could be traded on RealVol futures.
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RealVol futures
have an underlying such as a physical asset, security,
or a futures contract.
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Typically,
RealVol 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
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RealVol futures do not settle to a directional security, asset, or index price. Rather, expiration is to the realized volatility index (RVOL), which is a calculation of realized volatility using the RealVol daily formula of daily closing prices of the underlying.
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The expiration value of RealVol futures is based on the actual movement of an underlying over a specific time frame.
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RealVol 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, RealVol futures are based
on the returns of the underlying over many days. In a way,
the RealVol 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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RealVol futures have no sensitivities — delta, gamma,
theta, kappa (vega), or rho.
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