Hi,
I am reading a rates research report but I can't understand the logic behind the following volatility strategy.
I would be thankful if anyone could share the idea or provide any related link or source.
1. Selling ATM 1y*10y payers against 1y*2y and 1y*30y payers, given the relative richness of 1y*10y vols.
2. Recommend 3m*5y 1x2 receiver spreads as a way to benefit from low realized vol, rich receivers, and the low probability of a large rally.
3. Recommend a 3m*5y-3m*30y ATM+25 bear-steepener to benefit from a large long-end driven sell-off.
In the strategy number 3, I do know the conditional trading on bear steepener but can't figure out what the +25 stands for and why trade ATM+25.
Thank you
I am reading a rates research report but I can't understand the logic behind the following volatility strategy.
I would be thankful if anyone could share the idea or provide any related link or source.
1. Selling ATM 1y*10y payers against 1y*2y and 1y*30y payers, given the relative richness of 1y*10y vols.
2. Recommend 3m*5y 1x2 receiver spreads as a way to benefit from low realized vol, rich receivers, and the low probability of a large rally.
3. Recommend a 3m*5y-3m*30y ATM+25 bear-steepener to benefit from a large long-end driven sell-off.
In the strategy number 3, I do know the conditional trading on bear steepener but can't figure out what the +25 stands for and why trade ATM+25.
Thank you
