CBOE Rolls Out VXST Component Volatility Indexes

In preparation for futures trading on the CBOE Short-Term Volatility Index (VXST), which pending regulatory approval, is expected to begin February 13 the research and systems guys have CBOE have rolled out two VXST component volatility indexes.  These two new indexes will allow traders the ability to see the contribution from each of the option series that feed into the VXST calculation.

Both the CBOE Volatility Index (VIX) and VXST are calculated using SPX options that expire on two different dates.  VXST is a measure of 9 day implied volatility while VIX is a measure of 30 day implied volatility.   For VIX, VIN shows the nearer term SPX expiration used in the VIX calculation while VIF shows the farther term SPX expiration used in the VIX calculation.  Last this afternoon VIX was quoted at 21.30, VIN was at 22.25 and VIF was quoted at 20.83.  This means that the near month series (currently February standard SPX options) indicated an implied volatility of 22.25 and the farther month implied volatility level was at 20.83.  This gives traders an idea of what sort of impact each series is having on the VIX calculation.

As of today there are also indexes quoted that show the contribution of the near month and far month series to the VXST calculation.  VSTN shows the near dated series feeding into VXST while VSTF displays the level of the farther dated option series used to calculate VXST.  Right now (February 3rd) VXST is calculated using SPX options that expire on February 7th and February 14th.  Late today VXST was at 23.70, with VSTN at 25.32 and VSTF at 23.46.  This can be interpreted as the February 7th options having an elevated implied volatility level relative to the February 14th contracts.

As the time draws closer to trading VXST Futures I’ll spend a little more time on how VSTF and VSTN may be used by traders to make short term volatility trading decisions.  For now, if you are focused on VIX you should have VIX, VIN, and VIF on your quote screen and if you are getting ready for VXST trading VXST, VSTN, and VSTF should be grouped together on your screen as well.