On Thursday, Cboe Global Markets announced the launch of its new Cboe S&P 500 Variance Futures (Ticker: VA), which is set to begin trading on September 23.
Cboe Set to Launch New S&P 500 Variance Futures
The derivatives exchange said the new futures contracts, designed to hedge against and capitalise on US equity market volatility moves, aim to give investors a streamlined way to trade the spread between implied and realised volatility.
They believe the futures will appeal to a wide range of market participants, such as volatility traders, hedge funds, institutional investors, and portfolio managers.
“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 Cboe’s Head of Product Innovation Rob Hocking.
He added: “We believe this new product will offer an accessible and capital-efficient way to replicate the exposures of OTC variance swaps.”
Cboe explained in its press release that contracts will settle based on a calculation of the annualised realised variance of the S&P 500 Index. In addition, it will quote and trade directly in variance units.
They also state that with a contract size of $1 and settlement aligned with standard SPX options, the futures are designed to integrate into existing trading strategies.
Additionally, Cboe said it will introduce trading in options on VIX Futures starting October 14. The expansion of the SPX and VIX product suite is also designed to meet growing customer demand for volatility-related products.
