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"We expect that the mini-VIX futures contract will attract the attention of sophisticated investors and institutions who are looking for a smaller-scale play on implied volatility that's independent of the direction and level of stock prices, or a way to hedge equity returns, diversify portfolios, and spread implied against realized volatility," said CFE Managing Director Andrew Lowenthal. "As seen over the last year, the VIX has experienced some dramatic spikes, and a smaller VIX futures contract with proportionately lower margins may be more manageable for a wider variety of users."
"We look forward to participating in CFE's new mini-VIX futures, as we see the smaller contract as an attractive trading vehicle for the individual investor," said David Graff, Senior Trader at Wolverine Trading, one of the firms that will be making markets when trading begins. "Many of today's very successful mini-contracts have started out as larger contracts and have become just as successful as their larger counterparts."
"An additional benefit," Graff said, "is that VIX options traders now can hedge with a like-sized futures contract, so we expect these traders to be natural participants."
The new cash-settled CBOE mini-VIX futures contract (ticker symbol VM) initially will list March, April and May serial futures months, which coincide with CBOE's S&P 500 nearby options months. The new, smaller contract features a $100 multiplier versus $1,000 for the larger VIX futures contract, with a minimum price movement (tick) of $5 per contract.
As with other futures offerings, CFE will have a number of liquidity providers who will support two-sided markets.
CBOE Futures Exchange currently offers futures on six different contracts, including: the CBOE Volatility Index (VIX), CBOE DJIA Volatility Index (VXD), CBOE Russell 2000 Volatility Index (RVX) and CBOE S&P 500 3-Month and 12-Month Variance (VT and VA, respectively).
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CBOE MINI-VIX FUTURES (VM) PRODUCT SPECIFICATION OVERVIEW |
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Contract Size |
VIX times $100 |
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Pricing |
Like the cash index, pricing is stated in decimals |
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Minimum Price Intervals |
0.05 of one CBOE Volatility Index point = $5.00/contract |
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Dollar Value/Tick |
$5.00/contract |
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Contract Months |
Initially up to three near-term serial months |
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Trading Hours |
8:30 a.m. to 3:15 p.m., Chicago time |
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Platform |
CBOEdirect |
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Termination of Trading |
Day before the Final Settlement Date (see holiday treatment in full specifications) |
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Final Settlement Price |
30 days prior to expiration of nearby SPX options with at least eight days left to expiration - generally the Wednesday that is 30 days prior to the third Friday of the calendar month immediately following the month in which the mini-VIX contract expires (see holiday treatment in full specifications) |
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Delivery |
Cash settled |
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Position Limits |
5,000 contracts |
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Minimum Reportable Level |
250 contracts |
CFE, launched in March 2004, is a wholly owned subsidiary of Chicago Board Options Exchange, Incorporated, offering an all-electronic, open-access market model, with traders providing liquidity and making markets.CFE trades are cleared by the triple-A-rated Options Clearing Corporation (OCC).CBOE Futures Exchange is regulated by the Commodity Futures Trading Commission (CFTC).More information on CBOE mini-VIX futures, can be found at: http://cfe.cboe.com/Products/Products_VM.aspx
