CBOE Futures Exchange to Launch Weekly Expiration VIX

The CBOE Futures Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term (CFE) has unveiled its roadmap to launch a new contract on the company’s widely popular VIX index (Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term index). The exchange is aiming to launch a weekly expiration futures contract starting from July 23rd. The intention of the exchange is subject to a regulatory approval, which in this case should be closer to a formality.

After the launch of the futures contract, the CFE is expecting to rollout a VIX Weeklys option contract to complement the offering.

The widely popular benchmark of S&P 500 volatility has been on investors' radar for a number of years, becoming especially popular in the aftermath of the Great Financial Crisis of 2008. The contract is based on the real-time prices of options on the S&P 500 Index (SPX), reflecting the sentiment of investors on the 30-day stock market volatility.

Currently the contract expires on a monthly basis, which is somewhat limiting to certain investors. The CFE has decided that a four to five times monthly convergence to the VIX cash index will open new possibilities to investors. Under the current framework of a single monthly expiration, the price of the futures is getting closer to the underlying VIX index as the due date closes in.

The CEO of the CBOE Holdings, Edward T. Tilly, commented on the announcement, ”The addition of VIX weekly expirations to standard monthly expirations offers volatility exposures that more closely track the performance of the VIX Index.”

“VIX Weeklys futures will give investors more opportunities to trade VIX and greater trading precision when responding to breaking news and economic events,” he explained.

This by far isn’t the first product to which the CBOE is adding a weekly expiration schedule. The company started the offering in 2005. Currently, the VIX futures are a favorite hedging tool against stock market volatility mainly because the contract is tradable almost 24 hours a day with a short daily break totaling 15 minutes between 8:15 p.m. GMT and 8:30 p.m. GMT.