Cboe to Launch Options on VIX Futures on Monday, October 14

Rhea-AI Summary

Cboe Global Markets (CBOE) announced the launch of Options on Cboe Volatility Index (VIX) Futures (Ticker: UX) on October 14. These CFTC-regulated options will physically settle into front-month VIX Futures, offering investors a new tool to manage U.S. equity market volatility. The product complements Cboe's existing securities-based VIX Index options and may allow more market participants to trade VIX options products.

Key features include:

• European-style exercise
• P.M. settlement
• Physical settlement into front-month VIX futures
• Initial listing of contract expirations for every day the week of October 21 with two additional Friday expirations

This launch follows Cboe's recent introduction of S&P 500 Variance (VA) futures, expanding their volatility product suite ahead of the U.S. election.

Positive

• Launch of new Options on VIX Futures product, expanding Cboe's volatility offerings
• Potential to attract new market participants due to options-on-futures structure
• Record trading volumes in VIX Index options, with average daily volumes reaching over 851,000 contracts in 2024, up 60% from 2022
• Complementary to recently launched Cboe S&P 500 Variance (VA) futures

Negative

• None.

Insights

Financial Derivatives Expert

The launch of Options on VIX Futures by Cboe represents a significant expansion of their volatility product suite. This new offering addresses several key market needs:

• Provides a CFTC-regulated alternative to securities-based VIX options
• Enables more granular management of short-term volatility
• Potentially opens access to investors restricted from securities-based options

The timing is strategic, coinciding with increased market uncertainty due to the upcoming U.S. election and recent changes in Fed policy. The record trading volumes in VIX Index options, with a 60% increase in average daily volume from 2022 to 2024, indicate strong demand for volatility management tools.

For investors, this product offers enhanced flexibility in volatility trading strategies and risk management. The European-style exercise and physical settlement into front-month VIX futures provide a direct link to the underlying volatility market. However, as with any new derivative product, liquidity and market adoption will be important factors to monitor in the early stages of trading.

Market Analyst

Cboe's introduction of Options on VIX Futures is a strategic move that could significantly impact the volatility trading landscape. Key points to consider:

• Expands Cboe's dominance in the volatility products space
• Potentially increases trading volumes and revenue for Cboe (CBOE)
• Attracts new market participants, possibly boosting overall market liquidity

The product launch aligns with growing investor demand for sophisticated risk management tools, especially in the current uncertain economic environment. The endorsements from major market players like IMC US, Prime Trading and Melqart KEAL Macro Fund suggest strong industry support and potential for rapid adoption.

For Cboe shareholders, this could translate to increased revenue streams and market share. However, the success will depend on actual trading volumes and how well the product integrates with existing volatility trading strategies. Investors should monitor the uptake and liquidity of these new options in the coming months to gauge their impact on Cboe's financial performance.

• New CFTC-regulated options on futures will physically settle into front-month Cboe Volatility Index (VIX) Futures
• Designed to offer market participants the ability to more granularly manage volatility
• Further expansion of Cboe's volatility complex following launch of Cboe S&P 500 Variance (VA) futures

CHICAGO, Oct. 9, 2024 /PRNewswire/ -- Cboe Global Markets, Inc. (Cboe: CBOE), the world's leading derivatives and securities exchange network, today announced its new Options on Cboe Volatility Index (VIX) Futures (Ticker: UX) are planned to begin trading on Cboe Futures Exchange, LLC (CFE) on Monday, October 14.

The new Options on VIX Futures will provide 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 provide similar risk management and yield enhancement capabilities. Utilizing an option-on-future structure, the new product may 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.

"Investors have long utilized VIX options and VIX futures to help hedge and manage volatility exposure, and Cboe is proud to expand our volatility product suite at such a critical time," said Catherine Clay, Global Head of Derivatives at Cboe. "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. 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."

"20 years after Cboe launched VIX futures, followed by VIX options, and helped establish volatility as an asset class, we continue to prioritize product innovation, engage with our customers and bring new exchange-traded volatility derivatives to market," said Rob Hocking, Head of Product Innovation at Cboe. "We 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. We'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."

Christine Hansen, CEO at IMC US, said: "We are proud to support the expansion of listed volatility offerings from Cboe to meet the varying needs of investors"

Tom Chlada, Chief Operating Officer at Prime Trading, said: "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 our toolkit, enabling us to better express views on volatility and fine-tune our risk management approach. We believe the new options will help boost participation and trading opportunities in the volatility space, and we look forward to incorporating this tool in our portfolios."

Keith DeCarlucci, Chief Investment Officer at Melqart KEAL Macro Fund, said: "VIX futures and options play an important role when managing portfolios, and we welcome Cboe's further expansion of its exchange-traded volatility tools with Options on VIX Futures. Combined with the recent variance futures launch, we have two new products to leverage."

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 upcoming launch of Options on VIX Futures follows the recent launch 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 manage market volatility ahead of and following the U.S. election.

On Friday, October 11 at 8:30 am ET, Cboe will be hosting a webinar with speakers from Allspring Global, IMC Financial Markets, and Golden Horse Fund Management on how Options on VIX Futures can enhance trading ease and accessibility. To register for the webinar, please click here. For more information about Options on VIX Futures, visit: Options on Cboe Volatility Index^® Futures.

About Cboe Global Markets

Cboe Global Markets (Cboe: CBOE), the world's leading derivatives and securities exchange network, delivers cutting-edge trading, clearing and investment solutions to people around the world. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives and FX across North America, Europe and Asia Pacific. Above all, we are committed to building a trusted, inclusive global marketplace that enables people to pursue a sustainable financial future. To learn more about the Exchange for the World Stage, visit www.cboe.com.

Cboe Media Contacts			Cboe Analyst Contact
Angela Tu	Tim Cave			Kenneth Hill, CFA
+1-646-856-8734	+44 (0) 7593-506-719			+1-312-786-7559
atu@cboe.com	tcave@cboe.com			khill@cboe.com

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SOURCE Cboe Global Markets, Inc.

FAQ

When will Cboe launch Options on VIX Futures (Ticker: UX)?

Cboe plans to launch Options on VIX Futures (Ticker: UX) on Monday, October 14, 2024.

What is the settlement process for Cboe's new Options on VIX Futures?

The new Options on VIX Futures will have European-style exercise, P.M. settlement, and physically settle into front-month VIX futures.

How has the trading volume of Cboe's VIX Index options changed in recent years?

Cboe's VIX Index options have seen record trading volumes, with average daily volumes reaching over 851,000 contracts in 2024, up approximately 60% from 2022.

What regulatory body will oversee Cboe's new Options on VIX Futures?

The new Options on VIX Futures will be regulated by the Commodity Futures Trading Commission (CFTC) and cleared by The Options Clearing (OCC).