CBOE Holdings is to launch futures and options on the CBOE Russell 2000 Volatility Index in the coming weeks.
CBOE Futures Exchange (CFE) will begin trading the futures (VU) on 18 November, and Chicago Board Options Exchange (CBOE) plans to introduce trading in the options (RVX) on 2 December.
The Russell 2000 Index is a measure of the performance of small-capitalisation US stocks and an effective gauge and play on the health of the US economy – 84 per cent of the revenues generated by the companies in the index come from within the US.
VU futures and RVX options will allow investors to hedge volatility of a portfolio of small-cap stocks and to spread the volatility level of the Russell 2000 against large-cap index volatility to take advantage of differences between small- and large-cap company dynamics.
Used on their own or in combination with other CBOE Volatility Index products, Russell 2000 Volatility Index products will allow customers to hedge, diversify or take a directional view on volatility in the small-cap market sector.
The calculation of the CBOE Russell 2000 Volatility Index (RVX Index) is based on CBOE's VIX methodology applied to CBOE listed options on the Russell 2000 Index (RUT), the third most actively traded index option at CBOE in the first half of 2013. The RVX Index is an up-to-the-minute market estimate of the expected 30-day volatility of the RUT Index, calculated using real-time bid/ask quotes of RUT options that are listed on CBOE.
Jane Street Capital will serve as the designated primary market maker (DPM) for VU futures traded on CFE, and Group One Trading will be the DPM for the RVX options traded on CBOE.