CBOE - Turn Volatility Into Trading Opportunities With Cboe’s VIX Options & Mini-VIX Futures
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Rising inflation, waron the Eastern European front, a global pandemic, and the FederalReserve’s restrictive monetary policies have placed immense pressureon the financial markets throughout the last two years.
Given the multitude ofmacroeconomic variables adversely affecting the market, it’s perhapsnot surprising that intraday volatility was a central theme in 2022. A report by LPL Research, for example, found that the number of intraday stockmarket swings of over 1% reached highs unseen since the 2008 financialcrisis.
Theturbulent intraday trading environment extended throughout the year asa whole and Goldman Sachs estimated that 2022 would end up being thesixth-most volatile year since the Great Depression. The increase involatility adversely affected popular “risky” investment sectorssuch as growth stocks, which declined 30% compared to value stocks’7% decline.
Volatility does notappear to be abating in 2023. A recent report by State Street Corp analyzing the responses of 480 institutionalinvestors found that 64% of investors believe volatility will persistfor at least another year. A poll run by Reuters covering 150 strategists, analysts, and fund managersarrived at a similar conclusion.
Mini-VIX Options: UsingVolatility To Your Advantage
The term “volatility” is, to some, synonymouswith danger, but this may not be a completely accurate impression.
Traders using Cboe Global Markets Inc. (BATS: CBOE) VIXOptions , for example, know that volatility can be leveragedinto trading opportunities. Through VIX Options, traders can expresstheir opinion on the direction or movement of the VIX, buying callsand puts depending on their preference.
With VIX Options, volatility can betransformed from a threat to one’s portfolio to a trading vehiclelike a stock or commodity. Additionally, those looking to hedgeagainst volatility can do so with VIX Options, providing anotherpotential defense from the market’s whipsawing activity.
To improveaccessibility, Cboe Global Markets has also created Mini-VIXFutures , which are derivates based on the VIX Index (similarto VIX Options) but are 1/10th the size of a standard VIX Futurescontract. Like VIX Options, Mini-VIX Futures allow participants toexpress their views on the future direction of volatility, but they doso in a far more affordable manner.
Learn more about VIXOptions and Mini-VIXFutures .
This article wasoriginally published on Benzinga here .
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