Cboe Global Markets (CBOE) Product Launch summary

Product launch overview

• Physically delivered options on VIX futures will launch October 14, 2024, on Cboe Futures Exchange, expanding the suite of tradable VIX products and addressing strong demand for shorter-dated volatility instruments.

• VX options will offer daily expirations, starting with the front five daily contracts and two additional weekly Fridays, providing more granularity and flexibility for market participants.

• Settlement for VX options will be PM-settled and physically delivered into the underlying VIX future, differing from existing AM-settled, cash-settled VIX options.

• Options on VIX Futures feature European-style exercise, are CFTC-regulated, and will be cleared by The Options Clearing Corporation.

• A comprehensive online resource hub and a webinar on October 11 will support the launch with FAQs, contract specs, and use case scenarios.

Market impact and client perspectives

• The new product is expected to enhance risk management, allow for more targeted volatility strategies, and broaden access to participants, including those restricted from US security-based options.

• Institutional investors value the PM settlement and physical delivery for better alignment with portfolio strategies and more precise risk mitigation.

• Market makers anticipate improved liquidity and tighter bid-ask spreads due to the product's design, especially as VX options settle into the more liquid monthly VIX futures.

• APAC-based investors see increased accessibility and trading efficiency, with the product enabling more effective hedging and exposure to US equity volatility.

• The product rounds out the volatility toolkit, offering both short-dated and traditional options, and is expected to attract new participants and strategies.

Product design and future development

• The initial listing structure was chosen to meet strong demand for short-dated options, mirroring trends seen in SPX options trading.

• VX options will always settle into the front month future, never expiring on the same day as the final settlement of the underlying future.

• Expansion to additional strikes, expiries, or mini contracts will be considered based on market feedback and demand.

• No current plans to delist weekly VIX futures; ongoing evaluation will continue as the new product develops.

• Plans are underway to enable trading during Global Trading Hours, pending regulatory approval.