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CFE VIX Futures Basics

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VIX Futures Basics

The CBOE Futures Exchange (CFE) provides CBOE Volatility Index(VX) Futures as its signature contract to trade. VX Futures are a calculation of implied volatility of S&P 500 Options. Theoretically, they will rise when volatility increases, and fall when volatility decreases. Investors use the VIX as a tool to hedge their equity positions against sudden market movements.

 

VX Futures offers traders the opportunity to take advantage of projected volatility spikes in the equity markets. With the Brexit vote on the horizon, and uncertainty surrounding the outcome, we see a rise in VX Futures prices, implying increased equity volatility. That is exactly what this chart shows.

 

 

We see on this VX July 2016 chart a breakout from the few prior months. The chart had been trending downward, coming off highs in January and February, but the recent Brexit polls, coupled with weak US economic data has launched the VX Futures out of that short-term down trend.

 

The VX Futures are a popular tool for traders as they navigate turbulent market condition and seek opportunities to capitalize on volatility. No matter the direction, VX Futures are a major indicator for market participants and provide an excellent opportunity for sophisticated investors and traders.

 

VX Futures are somewhat unconventional futures products in the manor that they trade. If you are considering trading VX Futures, please familiarize yourself with the contract specifications by visiting http://cfe.cboe.com/products/spec_vix.aspx

 

Phillip Capital offers VX Futures trading on CQG platforms.

 

RISK DISCLAIMER: Trading in futures products entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. The information contained herein is provided to you for information only and believed to be drawn from reliable sources but cannot be guaranteed; Phillip Capital Inc. assumes no responsibility for errors or omissions. The views and opinions expressed in this letter are those of the author and do not reflect the views of Phillip Capital Inc. or its staff.