Cboe Global Markets Announces Launch Of Options On VIX Futures

Innovation is a never-ending process, and Cboe Global Markets, Inc. CBOE is demonstrating this principle with its latest planned launch of options on VIX futures.

The Cboe Volatility Index (VIX^® Index) is a popular measure of the stock market’s expectation of volatility over the next 30 days. The index reflects investor sentiment and the level of uncertainty or risk in the market. While Cboe currently offers securities-based VIX Index options, which allow investors to manage or gain exposure to the S&P 500^® Index – considered the leading indicator of the broad U.S. stock market – the new options on VIX futures will offer a similar utility but will be based on front-month VIX futures.

The new options are expected to complement the existing VIX Index options, providing customers with more choice in expiration dates and enabling more granular hedging strategies. With futures as the underlying asset, these options will be Commodity Futures Trading Commission-regulated, enabling a wider array of market participants who may otherwise not be able to access U.S. securities-based options to use this product to express their views on equity market volatility. However, options on VIX futures will be European-style, meaning that they can only be exercised at expiration and will physically settle into front-month VIX futures.

In speaking about the value proposition of this new product offering, Catherine Clay, Head of Global Derivatives at Cboe, stated, "We expect options on VIX futures will complement our existing product suite, appealing to a broad group of users, including Commodity Trading Advisors, customers of Futures Commission Merchants, and market participants currently active in VIX exchange-traded products and in Cboe’s SPX option and VIX product ecosystems."

As investors become more knowledgeable and sophisticated in their use of derivative instruments, their demand for these products will likely continue to increase. 

The new options on VIX futures are expected to begin trading on the Cboe Futures Exchange on October 14, subject to regulatory review.

Featured photo by Austin Distel on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice