Cboe Global Markets, Inc. (CBOE) is expanding its options offerings with the upcoming launch of options on VIX futures. The move showcases the company’s commitment to innovation and caters to the evolving needs of investors seeking sophisticated ways to manage market volatility.
The Cboe Volatility Index (VIX ® Index) serves as a widely recognized gauge of the stock market’s anticipated volatility over the next 30 days. It reflects the sentiment of investors and the level of uncertainty or risk present within the market. While Cboe currently offers securities-based VIX Index options, allowing investors to manage or gain exposure to the S&P 500 ® Index, the new options on VIX futures provide a similar functionality with a key difference: they are based on front-month VIX futures.
This new offering is designed to complement Cboe’s existing VIX Index options, providing customers with greater flexibility in expiration dates and enabling more precise hedging strategies. Because futures are the underlying asset, these options will fall under Commodity Futures Trading Commission (CFTC) regulation. This opens the door for a broader spectrum of market participants, potentially including those who may not have access to U.S. securities-based options, to utilize this product for expressing their views on equity market volatility.
It’s important to note that options on VIX futures will be European-style. This means they can only be exercised at expiration and will physically settle into front-month VIX futures.
Catherine Clay, Head of Global Derivatives at Cboe, highlighted the product’s appeal, stating, “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.”
As investors continue to develop their knowledge and sophistication in the use of derivative instruments, demand for such products is likely to rise. The new options on VIX futures are scheduled to begin trading on the Cboe Futures Exchange on October 14, pending regulatory approval.
