CBOE plans to launch options on the CBOE Short-Term Volatility Index (VXST) on Thursday, April 10. Below are points that can help in your analysis. Much more information is available at www.cboe.com/VXST.
1. VXST INDEX – The VXST Index is based on real-time prices of options on the S&P 500 Index that expire every week, and is designed to reflect investors’ consensus of future (nine-day) expected stock market volatility. The time series data history for the index begins in January 2011, and the VXST experienced sharp rises of more than 40% on nine different trading days since January 2011.
2. LAUNCH DATES AND SETTLEMENT. VXST futures (with a $1,000 multiplier) launched on Feb. 13, 2014. VXST options (with a $100 multiplier) are scheduled to launch on April 10. Both products have cash settlement, generally on every Wednesday morning throughout the year (if there is a conflicting holiday then the expiration date will be moved to the preceding business day).
3. TICKER SYMBOLS
VXST FUTURES TICKERS. CBOE set the VXST futures ticker symbols at VSW1, VSW2, VSW3, VSW4 and VSW5 (where W1 refers to the first week of the month, etc.). Click here for more details on Quote Vendor Symbols for VXST Futures.
The table below provides ticker symbol examples for “Week 3” VXST futures prices that expire on Wednesday, April 16, 2014 (with “3” being the week code, “J” being the month code and “4” the year code).
Symbol for VXST futures expiring on April 16, 2014 (week 3)
|Available at —|
|CFE Futures Delayed Quotes|
|CFE Historical Market Data|
VXST OPTIONS TICKERS. For CBOE’s index options, simply type in the index ticker symbol (e.g., VIX (and VXST after April 10)) at CBOE’s Delayed Options Quote Page to see delayed quote prices for index options.
4. VXST VALUES HAVE RANGED FROM 10.20 TO 68
Since January 2011, the VXST daily closing values have ranged from a high of 68 on August 8, 2011 to a low of 10.20 on Aug. 2, 2013. With a shorter time frame, the VXST often is more responsive to market moving news.
5. NEGATIVE CORRELATIONS AND DIVERSIFICATION. Many investors who explore the VXST note that VXST often moves in the opposite direction of many “traditional” indexes. Instruments with low or negative correlations potentially may be used for diversification purposes. Listed below are the negative correlations for the weekly returns of the VXST index versus other key indexes in the time period from Jan. 2011 through April 4, 2014 –
- S&P 500 (SPX) -0.69;
- Russell 2000 (RUT) -0.63;
- MSCI EAFE Index (in US$) -0.53;
- MSCI Emerging Markets Index (US$) -0.45, and
- S&P GSCI Index (commodities) -0.36.
During the same time period, the VXST Index had a positive correlation of 0.44 versus the Citigroup 30-year Treasury Index.
6. HIGH VOLATILITY OF VOLATILITY
Here is a list of the 360-day historic volatility for securities and futures as calculated by Bloomberg on April 8. High “vol of vol” plus negative correlation can make for a very intriguing investment instrument. The historic volatility of the VXST (and of short-term expected volatility) was much higher than that of the VIX, VXV, VXMT, and other volatility indexes.
- 180.6 VXST – CBOE Short-Term Volatility Index
- 110.4 VIX® – CBOE Volatility Index®
- 99.5 GVZ – CBOE Gold Volatility Index
- 91.4 VXEEM – CBOE Emerging Market ETF Volatility Index
- 90.0 VVIX – CBOE VIX of VIX Index
- 87.6 VXAPL – CBOE Equity VIX® on Apple
- 79.9 UXI – Index (on Bloomberg) Front-month VIX Futures
- 72.6 OVX – CBOE Crude Oil Volatility Index
- 65.6 VXV – CBOE S&P 500 3-Month Volatility Index
- 45.9 VXMT – CBOE Mid-term Volatility Index
- 29.6 (AAPL) – Apple
- 11.7 (SPX) – S&P 500®
7. BIG DAILY MOVES FOR VXST SPOT INDEX
As shown in the table below, the VXST spot index has had sizable daily moves of more than 60% on three different days since January 2011, all of which occurred on days in which the S&P 500 Index declined by more than 2%. All the moves for the VXST were bigger than the daily moves for the other three volatility indexes in the table.
8. RESONSIVENESS OF VXST FUTURES
As shown in the line chart and table below, both the VXST spot index and the near-term VXST futures had bigger daily moves (both up and down) than the VIX spot index and VIX near-term futures on several days in mid-March 2014. Investors who trade VXST options are encouraged to monitor the VXST futures price movements.
9. OPTIONS STRATEGIES. In light of the fact that the VXST index and futures have had some big moves, some of the VXST options strategies that investors could explore include long VXST call options for quick upside potential. You can visit the VIX options strategy page to learn more about these options strategies –
- Long VIX Call Options
- VIX Out-of-the-Money Bear Put Spread
- VIX Vertical Call Spread and Adjustments
- VIX Options – Reverse Collar Strategy
10. MORE INFORMATION. Please visit www.cboe.com/VXST for VXST options and futures contract specifications, downloadable price history, updated price charts, and much more information on the VXST Index. Diane Hettwer contributed to this article.