OPTIONS REPORT: CBOE Set to Launch Weeklies Trading on April 10

The Chicago Board Options Exchange has set a April 10 date for the trading of options with a weekly expiration date.

The short-term volatility indexed or VIX options or Short-Term Volatility Index contracts will have trade under the VXSTSM ticker beginning Thursday, April 10, pending regulatory approval.

“We view short-term volatility as the next frontier in the ongoing development of the volatility trading space. We were pleased to introduce the Short-Term VIX Index in October, Short-Term VIX futures in February, and we now look forward to launching options on VXST,” CBOE Holdings CEO Edward Tilly said in a release. “We foresee investors using these new volatility products to better manage near-term volatility risk, to hedge short-term positions impacted by both event-driven and unexpected market moves, and to create strategies using VXST and VIX futures and options to capture changes in volatility term structure.”

According to the CBOE, the Short-Term Volatility Index and CBOE Volatility Index are complementary. Like the VIX Index, the VXST Index reflects investors’ consensus view of expected stock market volatility using CBOE’s proprietary VIX methodology. Both indexes use S&P 500 Index (SPXSM) options in their calculations.

The VIX Index uses SPX monthly options to measure expectations of 30-day volatility, while the VXST Index uses SPX options that expire every week (including SPX WeeklysSM options) to gauge expectations of nine-day volatility. The VXST Index’s shorter time horizon makes it particularly responsive to short-term volatility triggered by market events such as corporate earnings, government reports and Fed announcements.

The 30-day VIX Index and the nine-day VXST Index are highly correlated, but the VXST Index is generally more volatile than the VIX Index.