Today is the 10 year anniversary of the launch of VIX futures, traded at the CBOE Futures Exchange (CFE).
CFE has achieved tremendous success with these futures, based on its proprietary CBOE Volatility Index (VIX). It has also expanded into other volatility-based products, as volatility as an asset class has exploded in recent years. There are currently eight VIX-related contracts traded on the CFE.
But the CBOE still thinks of VIX futures as a relatively new product, with much more to come in the near future.
Jim Lubin, senior managing director of CBOE Futures Exchange, said the past few years have been a great time for the volatility space.
“The VIX futures for the first time enabled the trading of volatility through an exchange-listed instrument,” he said. “But we are only starting to hit our stride.”
The exchange has been hard at work developing the domestic (U.S.) marketplace, and continues to see new users of VIX futures here, who take advantage of a number of investment strategies employing volatility in diversified portfolios, volatility portfolios, and equity-only portfolios, he added.
Now the rest of the world is starting to take note of the VIX products, and the exchange is starting to expand internationally. It began last fall by adding another 45 minutes to U.S. trading hours for the VIX futures, for domestic users that wanted access to the contract after the traditional close of business.
They followed that up by expanding hours during the European time zone, adding five hours so that the trading day starts at 2:00 am Chicago time, which coincides with the London market opening at 8:00 am.
“That has met with tremendous success, for example as the crisis in the Ukraine occurred, folks wanted access to the VIX futures at that hour to hedge market volatility,” Lubin said.
The natural extension now is into the Asian time zone, he said, which would bring the exchange to nearly 24 hour trading time. The CFE plans to start offering trading in that time zone starting June 22, when the trading day will begin at 3:30pm the previous day (Chicago time) and run to 3:15pm the following day. That gives traders a 23 ¾ – hour period, with a brief 15-minute closing between the two sessions, Lubin said.
“The road is wide open for us to reach a broader global user base. 10 years is just one milestone along the way,” he added.