CBOE Futures Exchange, LLC (CFE®) plans to list futures with weekly expirations on the CBOE Volatility Index® (VIX®) beginning Thursday, July 23, 2015, subject to regulatory review. VIX Weeklys options at CBOE are expected to follow on a later date, also subject to regulatory approval. The new VIX Weeklys futures and options will offer more expirations that have the potential to provide more precision and responsiveness for investors. www.cboe.com/VIXWeeklys
- COLUMNIST’S REMARKS
In the Striking Price column in Barron’s, Steve Sears noted that with the new VIX Weeklys futures and options –
“ … traders will be able to calibrate VIX contracts with market-moving events, ranging from economic data releases to Federal Reserve rate-setting decisions. This should prove attractive because the capital at risk is relatively small, and payouts can be huge. Since CBOE introduced weekly expirations in 2005, short-dated expirations have proven wildly popular. Overall, about 35% of CBOE total volume is attributed to weekly expirations, up from 26% in 2013. …”
- MORE PRECISION
The addition of weekly expirations to standard monthly futures and options expirations offers volatility exposures that more precisely track the performance of the VIX Index. By ‘filling the gaps’ between monthly expirations, investors may obtain new opportunities to establish short-term VIX positions, and fine-tune the timing of their hedging and trading activities.
- MORE RESPONSIVENESS – COMPARING SIX SELECT DATES
The closer VIX futures and options are to expiration, the more closely they generally track the VIX Index. For example, compare the daily % moves in the column charts below of the VIX Index (in orange) and the VIX nearby futures (in green). Note that on the three charts below on the left (within 7 trading days of the standard VIX expiration), the VIX nearby futures rose more than 25% on all three dates. However, for the three column charts below on the right (dates more than 16 trading days prior to the standard VIX expiration), the VIX nearby futures rose less than 14.5%. With the addition of the new VIX Weeklys futures, investors should always have access to VIX futures with five or fewer days to the VIX futures expiration, and thus have access to VIX futures that potentially are more responsive than VIX futures with 20 or 30 days to expiration. See the next section for more analysis on this point.
- MORE RESPONSIVENESS – COMPARING MORE THAN 2,700 DATES
While in the previous section I presented six select dates to compare responsiveness, the chart below presents the beta of the daily change of VIX futures to the VIX Index as a function of time to expiration. Note that the VIX futures had a beta of 0.79 with one day to the VIX standard expiration, while the VIX futures had a beta of 0.39 with 33 days to expiration.
With the addition of the new VIX Weeklys futures, investors should always have access to VIX futures with five or fewer days to the VIX futures expiration, and thus have access to VIX futures that potentially have a higher beta to the VIX Index than VIX futures with 20 or 30 days to expiration.
- TICKER SYMBOLS AND MORE EXPIRATION DATES
CBOE expects that quotes on VIX Weeklys will be listed within the VIX futures and options chains.
VX Weeklys Futures symbols will be VX01 through VX53. Embedded numbers denote the specific week of a calendar year during which a contract is settled. A VX ticker symbol followed by a number will not be used for any week that has the standard expiration for VIX futures (e.g., on August 19, 2015). In the table below, note that for this month and previous months, there was only one expiration date for VIX futures, but in the future most months should have 4 or 5 expirations for VIX futures.
- MORE INFORMATION AT WEBSITE
More information and updates regarding VIX Weeklys futures and options is at www.cboe.com/VIXWeeklys