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Chicago Board Options Exchange (CBOE) will begin trading options on the CBOE Nasdaq-100 Volatility Index (ticker symbol VXN) and the CBOE Russell 2000 Volatility Index (ticker symbol RVX) tomorrow, Thursday, September 27, 2007, under licensing agreements with The Nasdaq Stock Market, Inc. and The Russell Investment Group.
These two new contracts expand the suite of volatility products offered exclusively at CBOE and the CBOE Futures Exchange (CFE). CBOE will now offer options on three of CBOE's volatility benchmarks, as VXN and RVX options will join the popular CBOE Volatility Index (VIX) options. Since their launch in February 2006, VIX options have already traded over twenty million contracts, making VIX options the most successful new product launch in CBOE history.
At the CBOE Futures Exchange, futures on the CBOE Nasdaq-100 Volatility Index (VXN) and the CBOE Russell 2000 Volatility Index (RVX) began trading on July 6, 2007. CFE's other volatility products include: futures on the CBOE Volatility Index (VIX) and the CBOE DJIA Volatility Index (VXD), as well as CBOE S&P 500 3-month (VT) and CBOE S&P 500 12-month Variance (VA) futures.
CBOE Volatility Indexes are designed to reflect investors' consensus view of expected volatility over the next 30 days in the respective underlying indexes, and as such, can be used as a benchmark of investor sentiment. CBOE Volatility Indexes are derived from options prices of each index traded at CBOE.
The CBOE Nasdaq-100 Volatility Index (VXN) is an up-to-the minute market estimate of expected volatility that is calculated by using real-time Nasdaq-100 Index (NDX) option bid/ask quotes. VXN uses nearby and second nearby options listed at CBOE with at least eight days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the Nasdaq-100 Index. The same methodology is applied to the CBOE Russell 2000 Volatility Index (RVX), which uses the real-time Russell 2000 Index (RUT) option bid/ask quotes. To learn more about CBOE's Volatility Indexes, including methodology, daily and historical data and charts, contract specifications, and other information, please visit www.cboe.com/volatility.
Both VXN and RVX options will be cash-settled, European-style exercise, and are based on the value of the respective underlying Volatility Index. Trading hours will be 8:30 a.m. to 3:15 p.m. (Chicago Time). VXN and RVX options will both trade on the February expiration cycle, with introductory expirations in October, November, December and February. Initial strike prices in VXN options have been set at 10, 15, 17 ½, 20, 22 ½, 25, 27 ½, 30, 35 and 40, with no position limits, while initial strike prices in RVX options have been set at 15, 20, 22 ½, 25, 27 ½, 30, 32 ½, 35, 37 ½, 40 and 45, with position limits of 50,000 contracts. Group One Trading, LP has been named the Designated Primary Market Maker (DPM) in both options.
CBOE, the largest U.S. options exchange and the creator of listed options, is regulated by the Securities and Exchange Commission (SEC). For additional information about CBOE and its products, access CBOE's website at www.cboe.com/.
