Cboe Global Markets, Inc. (Cboe: CBOE), the derivatives and securities exchange network, announced its Options on Cboe Volatility Index (VIX) Futures (Ticker: UX) are planned to begin trading on Cboe Futures Exchange, LLC (CFE) on October 14.
The Options on VIX Futures will aim to offer investors an additional tool to help manage U.S. equity market volatility, complementing Cboe’s existing securities-based VIX Index options, which are designed to offer “similar” risk management and yield enhancement capabilities.
Utilizing an option-on-future structure, the latest financial product may now allow more market participants, including those restricted from accessing securities-based options, to trade a VIX options product.
Cboe’s VIX Index options have seen “record trading volumes” during the last two years, with average daily volumes reaching over 851,000 contracts in 2024, up approximately 60% from 2022, as more investors have sought utility the options offer.
Catherine Clay, Global Head of Derivatives at Cboe explained that with its options-on-futures structure, the new Options on VIX Futures will look to meet growing customer demand as Cboe works to provide an “efficient and seamless experience” to both existing and new CFE market participants.
Clay added that the launch will complement our existing volatility offerings, including the recently launched Cboe S&P 500 Variance futures, and enable more investors with the ability to help “manage volatility and risk” through the election season and beyond.
Rob Hocking, Head of Product Innovation at Cboe said that they believe there is a strong demand for risk management tools, especially as investors prepare for the “upcoming election and the recent change in the Fed’s monetary policy.”
Hocking pointed out that they’ve seen a shift in how investors are using options on a day-to-day basis, and with Options on VIX Futures having a “mid-curve structure” and the ability to offer short-term exposure, investors are expected to be able to “manage short-term volatility with greater precision.”
Tom Chlada, Chief Operating Officer at Prime Trading, said that Prime’s investment philosophy is to protect and grow capital, and Cboe’s new Options on VIX Futures will be a very welcomed addition to their toolkit, enabling them to “better express views on volatility and fine-tune our risk management approach.”
Options on VIX futures will have European-style exercise, “P.M. settlement and physically settle into front-month VIX future.”
At launch, CFE will list contract expirations for every day the week of October 21 with “two additional Friday expirations.”
Each weekday beginning October 21, CFE plans to list “a new contract” for trading expiring on the “same weekday in the week or weeks following.”
The contracts will be regulated by the Commodity Futures Trading Commission (CFTC) and cleared by The Options Clearing Corporation (OCC).
The planned launch of Options on VIX Futures comes after the introduction of Cboe S&P 500 Variance (VA) futures, which are designed to offer a “streamlined approach” to trading the spread between “implied and realized volatility.’
Both products add to Cboe‘s existing volatility suite and provide investors with exchange-traded solutions to more effectively manage “market volatility” ahead of and after the highly-anticipated U.S. election.