Cboe Expands Volatility Trading Options with Launch of VIX Futures Options
TL;DR
Cboe's new options on VIX futures offer more choices for expressing directional views and managing market volatility exposure, potentially giving traders a competitive advantage.
Options on Cboe Volatility Index Futures are contracts representing the right to buy or sell an underlying futures contract at a specified price on or before a specified date.
The launch of Options on Cboe Volatility Index Futures expands trading capabilities, potentially meeting rising investor demand for options trading and enhancing risk management efficiency across the entire market.
Cboe's new VX Options provide increased optionality, a new and different payout profile, and the ability to take short-term views on forward volatility, offering valuable insights into market dynamics.
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Cboe Global Markets, Inc. (CBOE: CBOE) has launched Options on Cboe Volatility Index Futures (VX Options), a new product designed to provide investors with additional choices for managing equity market volatility exposure. This development comes as options trading volumes continue to surge, with the Options Clearing Corporation reporting that total U.S. options volumes exceeded 11 billion contracts in 2023, marking a 126% increase since 2019.
The introduction of VX Options expands Cboe's ecosystem of tradable volatility products, potentially enabling investors to better understand and navigate market volatility. These European-style options are physically settled and have PM settlement, with the underlying asset being the front-month VX futures contract.
One of the key benefits of VX Options is their ability to provide 'mid-curve style' exposure, offering a new payout profile in the exchange-traded derivatives space. This feature allows investors to take short-term views on forward volatility movements, which could lead to increased liquidity in the market. Additionally, the in-the-money options settle into the front-month VIX futures contract, enabling more precise delta management.
The launch of VX Options could have significant implications for both institutional and retail investors. By providing new insights into the volatility-of-volatility term structure, these options may enhance risk management efficiency across the entire market. This innovation comes at a time when investors are increasingly seeking sophisticated tools to manage risk and capture market opportunities.
Catherine Clay, Global Head of Derivatives at Cboe, emphasized the product's importance, stating that it meets growing customer demand and complements Cboe's existing volatility offerings. The launch is particularly timely as investors seek ways to manage volatility and risk through the upcoming election season and beyond.
As the demand for derivative instruments grows, products like VX Options could play an increasingly important role in investors' strategies. To support this trend, Cboe continues to offer educational resources through its Options Institute, providing both novice and experienced traders with the knowledge needed to navigate these complex financial instruments.
The introduction of VX Options represents a significant development in the volatility trading landscape, offering market participants new ways to express directional views and manage their exposure to equity market volatility. As financial markets continue to evolve, innovations like these are likely to shape the future of risk management and trading strategies.
Curated from News Direct
