US 30yr Futures Volatility Cheap versus 5yr Volatility

October 18, 2019 11:15 AM
Futures Options Trade Idea

Futures Options Trade Idea


US 30-Year Vol (USZ) looking cheap again versus US 5-Years (FVZ) – Trade Analysis


Trade Idea: 


USZ 158 Put – 4.367*FVZ 118.25 Put with 35 days to expiry

If you’re on the steepening track in the US, the recent drop in 30-Year Vol might be worth a look, you should be able to get similar Delta Puts in US 30-Year (USZ) vs Selling US 5-year Puts for a small credit.

For example, USZ 158 Puts versus FVZ 118.25 Puts, with a vega weighting 4.36 should price around flat. These are both approx 30 Delta strikes.

The switch has dipped recently and now should pay credit for the Put steepener



Just remember, this is a trade idea only and not investment advice. Do your own research and consider your risk tolerance. Know your risk.

Disclosure: We may have trading positions in the same or highly correlated trading structures. 



About the Author

George Austin is a co-founder of Pricing Monkey. Pricing Monkey provides financial derivative pricing and analytics software that helps improve understanding of complex derivative positions.