SAVI Squared

SAVI Squared contracts are contracts that obligate the holder to buy or sell variance at predetermined variance strike price at a specified future time.

Benefits

• SAVI Squared prices increase when the market uncertainty / volatility increases
• Variance usually reacts opposite to the market, i.e. when the market increases, variance usually decreases and vice versa
• A direct exposure to volatility is afforded by trading SAVI Squared contracts
• Conveniently gain exposure to volatility by trading SAVI Squared contracts, compared to indirectly gaining volatility exposure by delta hedging options.

Who should use this product?

• Investors who would like to take a direct view on volatility
• Companies who would like to hedge business exposure to volatility
• Option traders who would like to lay off volatility risk
• Investors/traders who would like to hedge against a decrease in liquidity (decreased liquidity is usually accompanied by increased volatility)

How to use this product?

• Initial Margin Requirements
• Safex Variance Futures: How do they work?
• Example:Determination of the number of SAVI Squared contracts to trade in order to hedge a certain vega notional amount.
• Standardised variance futures vs Can-do variance futures