Stocks & Commodities V. 27:11 (39): Futures For You by Carley Garner
Product Description
Futures For You by Carley Garner
VIX FUTURES
How can I trade Vix futures?
On March 26, 2004, the Chicago Board Options Exchange (Cboe) listed a futures contract with its volatility index (Vix), often referred to as the fear index, as the underlying asset. Although the Vix has been in existence for some time, it wasn’t always tradable via futures contracts. As is the case with any new listed product, liquidity has been an issue for Vix speculators; however, volume and open interest are on the rise.
That said, don’t make the mistake of attempting to trade the miniversion of the Vix. It is common to see fewer than 20 contracts traded in a session and the lack of volume in the minicontract creates large bid/ask spreads, increasing the intrinsic costs of participating in the market. This might make exiting the trade difficult and expensive in fast-moving market conditions.
The value of the Vix is relative to real-time prices of options on the Standard & Poor’s 500 (Spx) also listed on the Cboe. The Vix is intended to reflect the investor’s consensus view of future market volatility over the next 30 days or so and will fluctuate with the implied volatility built into option pricing.
VIX FUTURES
How can I trade Vix futures?
On March 26, 2004, the Chicago Board Options Exchange (Cboe) listed a futures contract with its volatility index (Vix), often referred to as the fear index, as the underlying asset. Although the Vix has been in existence for some time, it wasn’t always tradable via futures contracts. As is the case with any new listed product, liquidity has been an issue for Vix speculators; however, volume and open interest are on the rise.
That said, don’t make the mistake of attempting to trade the miniversion of the Vix. It is common to see fewer than 20 contracts traded in a session and the lack of volume in the minicontract creates large bid/ask spreads, increasing the intrinsic costs of participating in the market. This might make exiting the trade difficult and expensive in fast-moving market conditions.
The value of the Vix is relative to real-time prices of options on the Standard & Poor’s 500 (Spx) also listed on the Cboe. The Vix is intended to reflect the investor’s consensus view of future market volatility over the next 30 days or so and will fluctuate with the implied volatility built into option pricing.
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