Chicago Board Options Exchange (CBOE) is to list options on the CBOE Russell 2000 Volatility Index (RVX) beginning 3 December.
The CBOE Russell 2000 Volatility Index (RVX Index) is an up-to-the-minute market estimate of the expected 30-day volatility of the Russell 2000 Index (RUT), calculated using real-time bid/ask quotes of RUT options that are listed on CBOE.
The calculation of the RVX Index is based on the CBOE Volatility Index (VIX Index) methodology applied to RUT options, the third most actively traded index option at CBOE in the first half of 2013.
RUT is a 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.
RVX options will allow investors to hedge the 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.
Futures on the CBOE Russell 2000 Volatility Index began trading at CBOE Futures Exchange on 18 November, 2013.
Used on their own or in combination with other CBOE volatility index products, CBOE Russell 2000 Volatility Index products will allow customers to hedge, diversify or take a directional view on volatility in the small-cap market sector.
Group One Trading will be the designated primary market maker (DPM) for the RVX options traded on CBOE.