The CBOE Futures Exchange, LLC (CFE) today announced that on Monday, March 2, it plans to launch trading in CBOE mini-VIX futures, a new contract which will be one-tenth the size of CFE’s standard CBOE VIX futures contract. The CBOE Volatility Index (VIX), based on real-time S&P 500 Index (SPX) options listed on Chicago Board Options Exchange (CBOE ), reflects investors’ consensus view of future expected market volatility of the S&P 500 Index.
“We expect that the mini-VIX futures contract will attract the attention of sophisticated investors and institutions who are looking for a smaller-scale play on implied volatility that’s independent of the direction and level of stock prices, or a way to hedge equity returns, diversify portfolios, and spread implied against realized volatility,” says Andrew Lowenthal, managing director at CFE. “As seen over the last year, the VIX has experienced some dramatic spikes, and a smaller VIX futures contract with proportionately lower margins may be more manageable for a wider variety of users.”
“We look forward to participating in CFE’s new mini-VIX futures, as we see the smaller contract as an attractive trading vehicle for the individual investor,” says David Graff, senior trader at Wolverine Trading, one of the firms that will be making markets when trading begins. “Many of today’s very successful mini-contracts have started out as larger contracts and have become just as successful as their larger counterparts. An additional benefit, is that VIX options traders now can hedge with a like-sized futures contract, so we expect these traders to be natural participants.”
The new cash-settled CBOE mini-VIX futures contract (ticker symbol VM) initially will list March, April and May serial futures months, which coincide with CBOE’s S&P 500 nearby options months. The new, smaller contract features a $100 multiplier versus $1,000 for the larger VIX futures contract, with a minimum price movement (tick) of $5 per contract.
As with other futures offerings, CFE will have a number of liquidity providers who will support two-sided markets.
CBOE Futures Exchange currently offers futures on six different contracts, including: the CBOE Volatility Index (VIX), CBOE DJIA Volatility Index (VXD), CBOE Russell 2000 Volatility Index (RVX) and CBOE S&P 500 3-Month and 12-Month Variance (VT and VA, respectively).
D.C.