Cboe wants to turn VIX into a never-ending trade
Cboe is exploring the development of perpetual futures for the VIX, a product traditionally used to measure stock market volatility. This move aims to eliminate the costs associated with contract rollovers, though it faces challenges due to the index's nature as a mathematical calculation rather than a physical asset.
Why it matters
The introduction of perpetual volatility products could significantly alter hedging strategies and liquidity in mainstream financial markets.
Perpetual futures, proposed by economist Robert Shiller in 1993 and commercialized by the crypto industry, are now being considered by Wall Street for products like the VIX, the stock market’s so-called fear gauge.
Cboe is exploring perpetual futures on the VIX, still early, with no contract specs or filing, according to Bloomberg .
The VIX Index measures the expected 30-day volatility of the S&P 500 based on options pricing. Because investors buy options to protect against rapid market drops, the demand for these contracts surges during downturns, spiking the index. Consequently, the VIX is widely known as Wall Street's "fear gauge."
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