​Daily Wrap – Google Impacts Var Swaps, IRS Targets Basket Options

As earnings heat up, it’s pretty obvious large cap is performing a lot better than small cap. Apple aside, nothing illustrates this better than the massive move Google’s share price made late last week. But, it also spells doom for single stock variance swaps, or at least dealer appetite for the transactions. We also take a look today at the IRS’ recent focus on basket options. Notices published earlier in the month gives taxpayers an idea of where future audits might go, while non-U.S. persons playing the transactions may also get caught if the contracts are included in the controversial 871(m) rule.