QuoteOriginally posted by: wickedwitIt is incorrect because swaptions are priced off of forwards. The current Swap curve and treasury curve is positively sloped and thus has forward rates that are higher then spot or par rates (the on-the-run swap rate). So your ATM put option strike on the 10yr swap rate in 1 year will be higher then the current spot rate. In 1 yr if nothing changes and you are left with your put option (payer) it will not be at the money like it was when you struck it, it will be out of the money. So, say the current spot 10yr swap rate is 2.15, and your atm payer swaption was struck at something like 2.20, in 1yr the 10yr swap rate is still 2.15 if nothing changes and you essentially experienced the roll down.Totally agree with this and with that we have a volatility roll down (as our theta changes).However, just to make myself clear, at the beginning of the conversation secret2 mentioned that he wanted to bet at ?5y and 10y points on the curve?, and I wanted to make clear that with swaptions (and with CMS) we can have our position (PVO1) at these rates as time goes on, and not worry about ?sliding cost?.