New exchange-traded solution designed to hedge against and capitalize on U.S. equity market volatility moves
Product debuts at a critical time as market participants navigate uncertain macro environment
Reflects Cboe's ongoing efforts to expand access and functionality of its volatility product suite
CHICAGO, Sept. 11, 2024 /PRNewswire/ -- Cboe Global Markets, Inc. (Cboe: CBOE), the world's leading derivatives and securities exchange network, today announced that its new Cboe S&P 500 Variance Futures (Ticker: VA) are planned to begin trading on Monday, September 23, on the Cboe Futures Exchange, LLC (CFE).
(PRNewsfoto/Cboe Global Markets, Inc.)
As investors continue to navigate an uncertain macroeconomic environment, the new Cboe S&P 500 Variance Futures will aim to provide market participants with an additional tool to calculate implied volatility of the U.S. equity market as measured by the S&P 500 Index, and to manage volatility risks and express directional views. The futures are designed to offer a streamlined approach to trading the spread between implied and realized volatility, enabling market participants to take advantage of discrepancies between market expectations and actual outcomes.
"Cboe's suite of proprietary products, including the highly popular SPX options and VIX options and futures, has served the needs of market participants globally for many decades," said Catherine Clay, Head of Global Derivatives at Cboe. "As investor needs for hedging, trading, diversification and asset allocation continue to evolve, we are committed to expanding our offerings to meet their demands. We look forward to launching the next generation of volatility products – including Cboe S&P 500 Variance Futures and options on VIX futures coming later in October, subject to regulatory review – which we expect will further equip our customers with new and efficient tools to trade volatility."
"The launch of Cboe S&P 500 Variance Futures comes at a crucial time when risk management is top of mind for many market participants, amid the backdrop of the upcoming U.S. election, shifting monetary policy and ongoing geopolitical tensions," said Rob Hocking, Head of Product Innovation at Cboe. "As demand for hedging and income generation rises, our goal is to broaden access to the derivatives markets by simplifying complex, capital-intensive strategies and making them more easily tradable in an exchange-listed, centrally cleared environment. For those looking to hedge against or capitalize on volatility moves, we believe this new product will offer an accessible and capital-efficient way to replicate the exposures of OTC variance swaps."
Cboe S&P 500 Variance Futures are expected to appeal to a wide range of market participants with diverse investment objectives, including volatility traders and hedge funds seeking capital efficiency and transparency, institutional investors managing equity volatility risk and expressing directional views, portfolio managers aiming for enhanced diversification and risk premia capture, and dealers and market makers transitioning from OTC variance swaps to standardized products.
Noel Smith, Managing Partner and Chief Investment Officer at Convex Asset Management, said: "The introduction of Cboe S&P 500 Variance Futures will be a useful and welcome addition to the volatility toolkit. Variance futures have a convex payoff structure compared to a linear payout with volatility. If long variance, holders might enjoy the benefits of enhanced tail convexity, and if there are liquidity issues at distant out-of-the-money strikes, long variance could continue to mitigate risk. Variance futures fill a useful gap in dispersion trading, tail hedging and relative value volatility arbitrage."
Keith DeCarlucci, Chief Investment Officer at Melqart Asset Management, said: "Having traded variance since 2002, being able to trade a simple cleared variance product will be a very welcome addition to our portfolio."
Bill Looney, Head of Global Business Development at X-Change Financial Access (XFA), said: "XFA is encouraged by the relaunch of the Cboe S&P 500 Variance Futures contract and its ability to provide the marketplace a listed alternative for trading variance. As a committed TPH holder, XFA, with its trading floor and electronic execution capabilities, looks forward to helping our clients – in all customer segments – access this innovative product."
The Cboe S&P 500 Variance Futures contracts will settle based on a calculation[1] of the annualized realized variance of the S&P 500 Index. The realized variance will be calculated once each day from a series of values of the S&P 500 Index beginning with the closing index value on the first day a VA futures contract is listed for trading and ending with the special opening quotation (SOQ) of the S&P 500 Index on the final settlement date of that contract.
The contracts will quote and trade directly in variance units, offering a simplified approach to managing and trading variance exposure. With a contract size of $1[2] and settlement aligned with standard SPX options (generally settling the third Friday of the month), these futures are designed to integrate seamlessly into market participants' existing trading strategies.
Additionally, Cboe expects to introduce trading in options on VIX Futures starting October 14, subject to regulatory review. The planned launch of these products underscores Cboe's ongoing efforts to expand the accessibility and functionality of its SPX and VIX product suite to meet growing customer demand. For more information about Cboe S&P 500 Variance Futures and product use cases, please visit the product page here.
About Cboe Global Markets
Cboe Global Markets (Cboe: CBOE), the world's leading derivatives and securities exchange network, delivers cutting-edge trading, clearing and investment solutions to people around the world. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives, FX, and digital assets, across North America, Europe and Asia Pacific. Above all, we are committed to building a trusted, inclusive global marketplace that enables people to pursue a sustainable financial future. To learn more about the Exchange for the World Stage, visit www.cboe.com.
Cboe?, CFE?, Cboe Futures Exchange?, VIX?, and Cboe Global Markets? are registered trademarks of Cboe Exchange, Inc. All other trademarks and service marks are the property of their respective owners. The S&P 500 Index is a product of S&P Dow Jones Indices LLC ("S&P DJI"), and the S&P 500 Index has been licensed to Cboe Exchange, Inc. for the purposes of creating the Cboe S&P 500 Variance Indicator. "Variance Indicator" means a series over time of realized or implied variance values, which series uses as input for its calculation, among other values, one or more of the following values: the value of one or more Standardized Options Contracts based on an Underlying S&P Index, the value of another financial interest based on an Underlying S&P Index, or the value of an Underlying S&P Index. S&P?, S&P 500?, SPX?, DSPX?, DSPBX, US 500 and The 500 are trademarks of S&P DJI or its affiliates, and have been licensed by Cboe Exchange, Inc. for certain purposes. Cboe S&P 500 Variance Futures settling into the Cboe S&P 500 Variance Indicator are not issued, marketed, sponsored or promoted by S&P Dow Jones Indices or its affiliates, and S&P DJI will have no liability with respect thereto.
Trading in futures and options on futures is not suitable for all market participants and involves the risk of loss, which can be substantial and can exceed the amount of money deposited for a futures or options on futures position. You should, therefore, carefully consider whether trading in futures and options on futures is suitable for you in light of your circumstances and financial resources. You should put at risk only funds that you can afford to lose without affecting your lifestyle. For additional information regarding the risks associated with trading futures and options on futures and with trading security futures, see respectively the Risk Disclosure Statement Referenced in CFTC Letter 16-82 and the Risk Disclosure Statement for Security Futures Contracts. Certain risks associated with options, futures, and options on futures and certain disclosures relating to information provided regarding these products are also highlighted at https://www.cboe.com/us.
Cboe Global Markets, Inc. and its affiliates do not recommend or make any representation as to possible benefits from any securities, futures or investments, or third-party products or services. Cboe Global Markets, Inc. is not affiliated with S&P, Convex Asset Management, Melqart Asset Management or X-Change Financial Access (XFA). Investors should undertake their own due diligence regarding their securities, futures, and investment practices. This press release speaks only as of this date. Cboe Global Markets, Inc. disclaims any duty to update the information herein.
Nothing in this announcement should be considered a solicitation to buy or an offer to sell any securities or futures in any jurisdiction where the offer or solicitation would be unlawful under the laws of such jurisdiction. Nothing contained in this communication constitutes tax, legal or investment advice. Investors must consult their tax adviser or legal counsel for advice and information concerning their particular situation.
Cboe Global Markets, Inc. and its affiliates make no warranty, expressed or implied, including, without limitation, any warranties as of merchantability, fitness for a particular purpose, accuracy, completeness or timeliness, the results to be obtained by recipients of the products and services described herein, or as to the ability of the indices referenced in this press release to track the performance of their respective securities, generally, or the performance of the indices referenced in this press release or any subset of their respective securities, and shall not in any way be liable for any inaccuracies, errors. Cboe Global Markets, Inc. and its affiliates have not calculated, composed or determined the constituents or weightings of the securities that comprise the third-party indices referenced in this press release and shall not in any way be liable for any inaccuracies or errors in any of the indices referenced in this press release.
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This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. You can identify these statements by forward-looking words such as "may," "might," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," and the negative of these terms and other comparable terminology. All statements that reflect our expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements.
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Some factors that could cause actual results to differ include: the loss of our right to exclusively list and trade certain index options and futures products; economic, political and market conditions; compliance with legal and regulatory obligations; price competition and consolidation in our industry; decreases in trading or clearing volumes, market data fees or a shift in the mix of products traded on our exchanges; legislative or regulatory changes or changes in tax regimes; our ability to protect our systems and communication networks from security vulnerabilities and breaches; our ability to attract and retain skilled management and other personnel; increasing competition by foreign and domestic entities; our dependence on and exposure to risk from third parties; global expansion of operations; factors that impact the quality and integrity of our and other applicable indices; our ability to manage our growth and strategic acquisitions or alliances effectively; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to minimize the risks, including our credit, counterparty, investment, and default risks, associated with operating a European clearinghouse; our ability to accommodate trading and clearing volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems; misconduct by those who use our markets or our products or for whom we clear transactions; challenges to our use of open source software code; our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status; our ability to maintain BIDS Trading as an independently managed and operated trading venue, separate from and not integrated with our registered national securities exchanges; damage to our reputation; the ability of our compliance and risk management methods to effectively monitor and manage our risks; restrictions imposed by our debt obligations and our ability to make payments on or refinance our debt obligations; our ability to maintain an investment grade credit rating; impairment of our goodwill, long-lived assets, investments or intangible assets; the impacts of pandemics; the accuracy of our estimates and expectations; litigation risks and other liabilities; and risks relating to digital assets, including winding down the Cboe Digital spot market and transitioning digital asset futures contracts to CFE, operating a digital assets futures clearinghouse, cybercrime, changes in digital asset regulation, and fluctuations in digital asset prices. More detailed information about factors that may affect our actual results to differ may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2023 and other filings made from time to time with the SEC.
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1 For more information on the calculation of the final settlement value, please refer to the Product Specifications for Cboe S&P 500 Variance Futures on Cboe's website here. 2 Multiplied by the futures price
