• New exchange-traded solution designed to hedge against and capitalize on U.S. equity market volatility moves
• Product debuts at a critical time as market participants navigate uncertain macro environment
• Reflects Cboe’s ongoing efforts to expand access and functionality of its volatility product suite

Cboe Global Markets, the world’s leading derivatives and securities exchange network, announced that its new Cboe S&P 500 Variance Futures (Ticker: VA) are planned to begin trading on Monday, September 23, on the Cboe Futures Exchange, LLC (CFE).

As investors continue to navigate an uncertain macroeconomic environment, the new Cboe S&P 500 Variance Futures will aim to provide market participants with an additional tool to calculate implied volatility of the U.S. equity market as measured by the S&P 500 Index, and to manage volatility risks and express directional views. The futures are designed to offer a streamlined approach to trading the spread between implied and realized volatility, enabling market participants to take advantage of discrepancies between market expectations and actual outcomes.

“Cboe’s suite of proprietary products, including the highly popular SPX options and VIX options and futures, has served the needs of market participants globally for many decades,” said Catherine Clay, Head of Global Derivatives at Cboe. “As investor needs for hedging, trading, diversification and asset allocation continue to evolve, we are committed to expanding our offerings to meet their demands. We look forward to launching the next generation of volatility products – including Cboe S&P 500 Variance Futures and options on VIX futures coming later in October, subject to regulatory review – which we expect will further equip our customers with new and efficient tools to trade volatility.”

“The launch of Cboe S&P 500 Variance Futures comes at a crucial time when risk management is top of mind for many market participants, amid the backdrop of the upcoming U.S. election, shifting monetary policy and ongoing geopolitical tensions,” said Rob Hocking, Head of Product Innovation at Cboe. “As demand for hedging and income generation rises, our goal is to broaden access to the derivatives markets by simplifying complex, capital-intensive strategies and making them more easily tradable in an exchange-listed, centrally cleared environment. For those looking to hedge against or capitalize on volatility moves, we believe this new product will offer an accessible and capital-efficient way to replicate the exposures of OTC variance swaps.”

Cboe S&P 500 Variance Futures are expected to appeal to a wide range of market participants with diverse investment objectives, including volatility traders and hedge funds seeking capital efficiency and transparency, institutional investors managing equity volatility risk and expressing directional views, portfolio managers aiming for enhanced diversification and risk premia capture, and dealers and market makers transitioning from OTC variance swaps to standardized products.

Noel Smith, Managing Partner and Chief Investment Officer at Convex Asset Management, said: “The introduction of Cboe S&P 500 Variance Futures will be a useful and welcome addition to the volatility toolkit. Variance futures have a convex payoff structure compared to a linear payout with volatility. If long variance, holders might enjoy the benefits of enhanced tail convexity, and if there are liquidity issues at distant out-of-the-money strikes, long variance could continue to mitigate risk. Variance futures fill a useful gap in dispersion trading, tail hedging and relative value volatility arbitrage.”

Keith DeCarlucci, Chief Investment Officer at Melqart Asset Management, said: “Having traded variance since 2002, being able to trade a simple cleared variance product will be a very welcome addition to our portfolio.”

Bill Looney, Head of Global Business Development at X-Change Financial Access (XFA), said: “XFA is encouraged by the relaunch of the Cboe S&P 500 Variance Futures contract and its ability to provide the marketplace a listed alternative for trading variance.  As a committed TPH holder, XFA, with its trading floor and electronic execution capabilities, looks forward to helping our clients – in all customer segments – access this innovative product.”

The Cboe S&P 500 Variance Futures contracts will settle based on a calculation[1] of the annualized realized variance of the S&P 500 Index. The realized variance will be calculated once each day from a series of values of the S&P 500 Index beginning with the closing index value on the first day a VA futures contract is listed for trading and ending with the special opening quotation (SOQ) of the S&P 500 Index on the final settlement date of that contract.

The contracts will quote and trade directly in variance units, offering a simplified approach to managing and trading variance exposure. With a contract size of $1[2] and settlement aligned with standard SPX options (generally settling the third Friday of the month), these futures are designed to integrate seamlessly into market participants’ existing trading strategies.

Additionally, Cboe expects to introduce trading in options on VIX Futures starting October 14, subject to regulatory review. The planned launch of these products underscores Cboe’s ongoing efforts to expand the accessibility and functionality of its SPX and VIX product suite to meet growing customer demand. For more information about Cboe S&P 500 Variance Futures and product use cases, please visit the product page here.

Source: Cboe