​Weekly: HSCEI/HSI Variance Plays; CME Debuts Listed S&P Divs

Hedge funds have been buying corridor variance swaps in the HSCEI and HSI given the range bound nature of spot and the less likelihood of volatility gapping out in the two indices. The trades, which allow index trading desks to offload HSCEI exposure, are becoming popular among funds as the spread you can capture from corridor variance swaps appears attractive on an historical realized volatility basis over the last five years. Meanwhile, the CME launched its S&P listed futures this week. According to market participants, investors are looking at owning 2016 and 2017 S&P 500 Annual Dividend futures in the lead up to December’s U.S. Fed meeting, which could see the central bank hike short-term interest rates. Also in Asia, with much talk about the Korean autocallable market lately, it seems the products could be set for a sluggish 2016 issuance-wise.