Turn Volatility Into Trading Opportunities With Cboe's VIX Options & Mini-VIX Futures

Rising inflation, war on the Eastern European front, a global pandemic, and the Federal Reserve’s restrictive monetary policies have placed immense pressure on the financial markets throughout the last two years. 

Given the multitude of macroeconomic variables adversely affecting the market, it’s perhaps not surprising that intraday volatility was a central theme in 2022. A report by LPL Research, for example, found that the number of intraday stock market swings of over 1% reached highs unseen since the 2008 financial crisis.

The turbulent intraday trading environment extended throughout the year as a whole and Goldman Sachs estimated that 2022 would end up being the sixth-most volatile year since the Great Depression. The increase in volatility adversely affected popular “risky” investment sectors such as growth stocks, which declined 30% compared to value stocks’ 7% decline. 

Volatility does not appear to be abating in 2023. A recent report by State Street Corp analyzing the responses of 480 institutional investors found that 64% of investors believe volatility will persist for at least another year. A poll run by Reuters covering 150 strategists, analysts, and fund managers arrived at a similar conclusion.

Mini-VIX Options: Using Volatility To Your Advantage

The term “volatility” is, to some, synonymous with danger, but this may not be a completely accurate impression. 

Traders using Cboe Global Markets Inc. CBOE VIX Options, for example, know that volatility can be leveraged into trading opportunities. Through VIX Options, traders can express their opinion on the direction or movement of the VIX, buying calls and puts depending on their preference. 

With VIX Options, volatility can be transformed from a threat to one’s portfolio to a trading vehicle like a stock or commodity. Additionally, those looking to hedge against volatility can do so with VIX Options, providing another potential defense from the market’s whipsawing activity. 

To improve accessibility, Cboe Global Markets has also created Mini-VIX Futures, which are derivates based on the VIX Index (similar to VIX Options) but are 1/10th the size of a standard VIX Futures contract. Like VIX Options, Mini-VIX Futures allow participants to express their views on the future direction of volatility, but they do so in a far more affordable manner. 

Learn more about VIX Options and Mini-VIX Futures. 

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