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New options planned to be listed on front-month Cboe Volatility Index (VIX) futures
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Options-on-future structure designed to offer new way to manage market volatility
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Expansion of VIX complex aims to address global demand for hedging tools
Cboe Global Markets, the world’s leading derivatives and securities exchange network, announced plans to launch options on Cboe Volatility Index (VIX) futures. The new options on VIX futures (VX) are expected to begin trading on Cboe Futures Exchange, LLC (CFE) on October 14, subject to regulatory review.
Cboe currently offers securities-based VIX Index options, which allow investors to manage or gain exposure to broad U.S. equity market volatility. The new options on VIX futures will provide similar utility but are based on front-month VIX futures. With futures as the underlying asset, these options will be CFTC-regulated, enabling a wide array of market participants that are restricted from accessing U.S. securities-based options to use this product to express their views on equity market volatility.
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“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. “Given the increased trading activity we’re seeing in VIX options and the strong demand for hedging tools this year, we’re especially excited to expand our volatility toolkit to include these new options on VIX futures and our planned relaunch of variance futures coming in late September. With the U.S. 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.”
“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,” said Catherine Clay, Head of Global Derivatives at Cboe. “By listing these options on Cboe’s U.S. 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.”
Options on VIX futures will be European-style (can only be exercised at expiration) and will physically settle into 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. Users of options on VIX futures may be able to hedge those positions using front-month VIX futures and standard VIX Index options.
The new options on VIX futures will be exclusively listed and traded on CFE, joining other prominent volatility products, such as Cboe Volatility Index (VIX) futures and the planned launches of Cboe S&P 500 Variance (VA) futures and Cboe S&P 500 Dispersion Index (DSPX) futures, subject to regulatory review.
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