On Thursday, CBOE Futures Exchange, LLC (CFE?) announced its plans to launch trading of futures with weekly expirations on the new CBOE Short-Term Volatility IndexSM?(ticker symbol: VXSTSM) on Thursday, February 13, pending regulatory review.
The product’s development by Chicago Board Options Exchange??(CBOE?) comes in response to the demand for WeeklysSM?options generally, and volatility contracts that measure a shorter time period in particular. ?Similar to CBOE’s Volatility Index??(VIX??Index), the Short-Term VIX Index reflects investors’ consensus view of expected stock market volatility using CBOE’s proprietary VIX methodology.?
Both indexes use S&P 500??Index (SPXSM) options in their calculations with the VIX Index utilizing SPX monthly options to measure expectations of 30-day volatility, while the VXST Index uses SPX options that expire every week (including SPX Weeklys) to gauge expectations of nine-day volatility.? The VXST Index’s shorter time horizon makes it particularly responsive to short-term volatility triggered by market events such as corporate earnings, government reports and Fed announcements.
CBOE Chief Executive Officer Edward T. Tilly said in a press release,?”We can’t help but be excited about launching Short-Term VIX futures, which combine the best features of our SPX Weeklys options and VIX futures. Traders will have at least four weekly expirations available at one time, providing tremendous flexibility to hedge around event-driven and unexpected market moves. We also expect professional traders to create strategies to take advantage of price differences between VIX and VXST products.”
Spot Trading will be the Designated Primary Market Maker (DPM) for the Short-Term VIX futures traded at CFE. ?
Tilly added, “Given the extraordinary appeal and record-setting volume of SPX Weeklys options and VIX futures, we expect futures traders who haven’t had the benefit of weekly expirations to embrace Short-Term VIX futures similar to options traders’ acceptance of Weeklys options.”?