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A New Volatility Product: Mini $VIX Futures

By Lawrence G. McMillan

The CBOE has listed mini volatility futures, trading with the base symbol VXM. These are worth $100 per point of movement, as opposed to the $1,000 per point of movement on the “big” volatility futures contract. Everything else is the same between the mini and the full contracts: expiration date, settlement pricing, etc. So far, only the first four months have mini contracts, while there are “big” volatility futures for nine months out. In hedged strategies, these can now be paired with the micro e-mini S&P futures (worth $5 per point of movement). This will allow smaller accounts to take advantage of some of the more sophisticated strategies. Volume in the mini volatility futures has been mostly in the front month, but the markets are tight (5 cents wide) so they are a viable trading tool at this time.

There is no change in the volatility options that are traded on the CBOE. They are worth $100 per point of movement of course, and they are priced off of the futures – mini or “big” since they trade at the same price. There are no plans for a “mini” option contract worth $10 per point that I am aware of.

In a somewhat related manner, the CME has announced that they will list futures contracts on the NASDAQ Volatility Index that they calculate – $VOLQ (quoted as an index on your quote system). $VOLQ was created in February 2019. The new futures will begin trading on October 5th, just in time for the volatility leading into the election. They will be worth $1,000 per point of movement, just as the “big” $VIX futures are. There was no mention of options on these futures, but I am sure there will be.

This article was taken from the 8/14/2020 edition of The Option Strategist Newsletter

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