Tue, Sep 1, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

CBOE Futures Exchange to launch first options on futures contract

Thursday, September 09, 2010
Opalesque Industry Update - The CBOE Futures Exchange (CFE) today announced that on September 28, it plans to introduce trading in its first options on a futures contract – Weekly options on VIX futures (ticker symbol - VOW), subject to regulatory approval. All key pieces of the VIX product suite will now be available on CBOE's electronic technology platform, CBOEdirect – cash-settled CBOE Volatility Index (VIX) options, VIX futures, options on volatility-related exchange traded notes, and, later this month, Weekly options on VIX futures.

"The addition of Weekly options on VIX futures, which incorporates a version of the popular 'Weeklys' expirations on security options, brings an added dimension to CBOE's suite of volatility products. It also underscores our ability to seamlessly support multiple products and their unique specifications on a single platform," CBOE President and COO Edward Joyce, said. "We've taken the best features of Weeklys expirations, further refined them for use with options on VIX futures, and created another way for customers to manage volatility."

"We expect that Weekly options on VIX futures will attract sophisticated investors, traders and institutions that are looking for more ways to construct unique exposures to volatility over a shorter timeframe," said CFE Managing Director Andrew Lowenthal. "We see the contract being used in a number of ways – as a shorter-term play on implied volatility that's independent of the direction and level of stock prices, to hedge equity returns and to diversify portfolios."

Lowenthal noted that market participants should recognize differences between currently traded "Weeklys" on individual equity options, index options and ETF options classes and the soon-to-be-introduced Weekly options on VIX futures.

  • Weekly options on VIX futures will have four consecutive contracts with weekly expirations, and CFE will add a new contract when the near-term contract expires; investors can select a contract with either one, two, three or four weeks to expiration, giving added flexibility to choose a desired timeframe. (Current Weeklys on security options begin trading on Thursdays and expire the following Friday, approximately a one-week timeframe.)
  • Exercise for Weekly options on VIX futures will be American style, with exercise allowable on any day up to and including the expiration date.
  • Expiration for Weekly options on VIX futures will be on Fridays (unless a CFE holiday), and will never correspond with VIX futures expiration dates (i.e., the Wednesday that is 30 days prior to an SPX option expiration date).
  • Settlement for Weekly options on VIX futures will feature physical settlement – one futures contract for each expiring options contract.

CFE, launched in 2004, currently offers futures on four contracts, including: the CBOE Volatility Index (VIX), CBOE mini-VIX (VM), CBOE S&P 500 3-Month Variance (VT) and CBOE S&P 500 12-Month Variance (VA). For the first eight months of 2010, CFE trading volume totaled more than 2.2 million contracts, compared with just under 500,000 contracts during the same period in 2009, a 348-percent year-over-year volume increase. Corporate website: http://www.cboe.com/

- FG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Hedge funds suddenly find real money is back in Argentina's debt, Elon Musk buys more SolarCity stock following hedge fund manager short, BlackRock plans to get into rental-home financing[more]

    Hedge funds suddenly find real money is back in Argentina's debt From Bloomberg.com: The real money is back in Argentina. Before the country’s default in July 2014 (its second in 13 years), most long-term investors abandoned its bond market. As they rushed out, Argentina became a favorit

  2. Activist News - Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping, Meet Europe's best activist investor[more]

    Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping From Businessinsider.com: Carl Icahn has picked his next target: Freeport-McMoRan. Icahn and a group of other investors have snapped up an 8.46% stake in mining company Freeport-McMoRan, according to a j

  3. North America - Hedge fund manager Ray Dalio’s challenge to the Fed[more]

    From Newyorker.com: For some reason, Janet Yellen, the chair of the Federal Reserve, decided to skip this year’s annual Fed conference in Jackson Hole, where monetary policymakers from the United States and abroad get together with some prominent academics to discuss the big issues of the moment. Th

  4. Opalesque Exclusive: Credit-focused hedge fund Numen Capital expects more volatility in Europe in coming months[more]

    Benedicte Gravrand, Opalesque Geneva: A London-based hedge fund, which has just hired two emerging managers, is cautious on Europe. Vassilis Paschopoulos and former Lehman’s colleague Nikos Kargadouris, launched a London-based credit-focused hedge fund called

  5. Performance - Hedge funds bruised by stocks’ meltdown, Capstone’s volatility hedge fund is having a monster month thanks to market mayhem[more]

    Hedge funds bruised by stocks’ meltdown From WSJ.com: Hedge-fund managers like to promise their investors protection from market swings. In the recent stock swoon, many were caught off guard. Billionaire managers such as Leon Cooperman, Raymond Dalio and Daniel Loeb are deeply in the red

 

banner