Chicago Board Options Exchange??(CBOE?) has announced Thursday, April 10 will be the launch date for trading of options with weekly expirations on the CBOE Short-Term Volatility IndexSM?(ticker symbol: VXSTSM), pending regulatory approval.
As the VXST and CBOE Volatility Index??(VIX Index?) are complementary, the VXST Index also 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 while the VIX Index uses SPX monthly options to measure expectations of 30-day volatility as the VXST Index uses SPX options that expire every week (including SPX WeeklysSM?options) to gauge nine-day volatility expectations.
However, with the VXST Index’s shorter time horizon, it’s particularly responsive to short-term volatility triggered by market events including corporate earnings, government reports and Fed announcements.?In addition, it is generally more volatile than the VIX Index, according to CBOE.
CBOE Holdings CEO Edward T. Tilly said in a press release,?”We view short-term volatility as the next frontier in the ongoing development of the volatility trading space. We were pleased to introduce the Short-Term VIX Index in October, Short-Term VIX futures in February, and we now look forward to launching options on VXST. Our new Short-Term VIX futures and options offer some compelling trading opportunities. We foresee investors using these new volatility products to better manage near-term volatility risk, to hedge short-term positions impacted by both event-driven and unexpected market moves, and to create strategies using VXST and VIX futures and options to capture changes in volatility term structure.”
Through February, ADV for SPX Weeklys options, VIX futures and VIX options increased by 57 percent, 43 percent and 33 percent, respectively, from the same period a year ago.