Options Observer: Trade ATM Volatility in an Accessible Size with VOLQ Futures

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

AT-A-GLANCE

Nasdaq-100 Volatility Index (VOLQ) futures give market participants trading access to at-the-money (ATM) volatility of the Nasdaq-100 index, without the requirement for continuous hedging of Greek exposures associated with options positions.  The VOLQ index underlying the futures approaches volatility measurement through a calculation based on the market prices of 32 Nasdaq-100 cash index options nearest to the ATM level. 

Generally, one can expect that VOLQ futures will move inversely to the Nasdaq-100 index, given the presences of negative skew in equities markets. Below is a sampling of market movements in NQ futures relative to the VOLQ index over a week in January 2022.  

Chart

Source: Bloomberg

  • CME Group implemented a change to the VOLQ futures multiplier, from $1,000 to $100, on January 10. VOLQ futures are now more approachable to a wider variety of market participants, and traders can more easily hedge exposure to at-the-money volatility of the Nasdaq-100 index in precise increments.    
  • Over 600 contracts traded during the first week since this change was implemented, a new record for the product. 
  • Tick size for the product is .05 for outright contracts and .01 for calendar spreads.  The dollar value of these minimum tick widths are $5 and $1, respectively. 
  • At current levels of the VOLQ index (25.00), the notional value of one VOLQ futures contract is roughly $2,500. 
  • Margin offsets are available for traders expressing hedged views relative to other CME Group Equity Index futures and options products.
  • Featured image provided by CME Group

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

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