Options on MSCI Emerging Markets Index (MXEF) – Volume of 472 Contracts on Tuesday

On Tuesday, October 6, the CBOE options on the MSCI Emerging Markets Index (MXEF) had reported volume of 472 contracts (236 call options and 236 put options).

Why are several investors expressing more interest in the MXEF options that launched earlier this year? Below are four key reasons I have heard from investors.

  1. BIGGER NOTIONAL SIZE FOR CASH-SETTLED INDEX OPTIONS

As shown in the chart below, many of the cash-settled index options have notional values that are much bigger than the notional values of corresponding ETF options. For example, the notional size of the new MXEF options is about 24 times as large as the notional size of the EEM ETF options. Buy-side investors often look for ways to get good bang-for-the-buck, and large-sized options have the potential to provide value and lower costs for investors. 1 - Notional size 1

  1. HIGHER IMPLIED VOLATILITIES AS SHOWN IN THE VOLATILITY SKEW CHART

On October 6 the MXEF options had higher implied volatilities at various strike prices as compared with the SPX options. Higher implied volatilities can appeal to sellers of options who wish to generate more gross premiums. 2 - Vol skew MXEF

  1. BIG MOVES FOR THE VXEEM AND MXEF INDEXES

In August 2015 the intraday highs were 111.39 for the CBOE Emerging Markets ETF Volatility Index (VXEEM), and 53.29 for the CBOE Volatility Index® (VIX®).

The MXEF stock index fell in each of the last five calendar months, and so emerging markets investors are looking for tools for hedging and income enhancement.  The closing value for the MXEF Index on Tuesday was 831.053 - VXEEM VIX

  1. IMPORTANT BENCHMARKS FOR TRILLIONS OF DOLLARS

In 2014 the estimated amount of assets under management tracking the indexes was $2 trillion for MSCI EAFE Index and $1.7 trillion for the MXEF Index.4 - MXEA - oct

CONCLUSION

To learn more about emerging markets and MXEF index options, please visit www.cboe.com/MXEF.