Vexed by variance

Variance swaps

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While many traders cheered the return of equity volatility in May and June, not all saw it as an opportunity for greater returns. For some investors, particularly those with short volatility positions through variance swaps and dispersion trades, the pick-up in volatility caused millions of dollars in mark-to-market losses. The losses haven't had a terminal effect on volatility trading - only one or two desks are thought to have retreated from the market, unlike last year, when losses in the