I’m as far from “experienced derivs trader” as you could be but this sounds like selling uncapped vs capped variance ie you are short tails in return for carry.https://twitter.com/bennpeifert/status/1482727232317493253 …
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The realized vol after two 15% days is more or less 100% so the loss on the uncapped is about $333m (33,000 x 100^2 and the gain on the capped is about $50m (33,000 x 36.5^2 because the cap is 2.5 x 14.5) for an overall loss of $283m, that sounds insanely high so it’s possible
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that I’m off by a factor of 12 (because it’s monthly not annual) or maybe I forgot to properly account for the remaining life of the swap or something, like I said not actually a derivs trader let alone an experienced one.
![Like I’m On Fire [a-zA-Z]](https://pbs.twimg.com/profile_images/1377694937/image_normal.jpg)
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Obvious follow up question is who is going to create the on-chain version of this to bring uncapped variance swap selling in crypto to retail? APYs would be insane.
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