Cboe Global Markets is set to launch options on Cboe Volatility Index (VIX) futures, with an expected date to commence trading on 14 October, subject to regulatory review.
Rob Hocking
Cboe currently offers securities-based VIX Index options, allowing investors to manage or gain exposure to broad US equity market volatility.
The new options on VIX futures will offer a similar utility but will be based on front-month VIX futures.
With futures as the underlying asset, these options will be CFTC-regulated, allowing for a range of market participants that are restricted from accessing US securities-based options to use this new offering to state their views on equity market volatility.
“As the pioneer in volatility trading, Cboe continues to expand its VIX complex with additional products and services targeted at helping market participants better manage portfolio risk and trade volatility,” said Rob Hocking, head of product innovation at Cboe.
“[…] With the US election quickly approaching, which has historically been a meaningful volatility catalyst for markets, we expect these tools will help meet customer demand to effectively manage risk.”
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The new options will be European-style, meaning they can only be exercised at expiration, alongside being physically settled into front-month VIX futures.
They are expected to complement the existing VIX Index options, allowing customers to have more choice in expiration dates and enabling more granular hedging strategies.
Users of options on VIX futures will have the ability to hedge those positions using front-month VIX futures and standard VIX Index options.
“By listing these options on Cboe’s US futures exchange, CFE’s global network of FCMs and brokers can trade them using the same connections and memberships already established for trading VIX futures, thereby enhancing ease and accessibility,” added Catherine Clay, head of global derivatives at Cboe.