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CBOE Holdings Inc.’s New Volatility Index Products

CBOE Holdings Inc.’s New Volatility Index Products
February 29
21:25 2012

In this two-month old year, CBOE Holdings, Inc. has already launched new CBOE and CFE volatility index products.

In January, the CBOE Futures Exchange (CFE) began trading CBOE Emerging Markets ETF Volatility Index security futures (VXEM) and the CBOE Options Exchange (CBOE) followed by trading options on VXEEM at month’s end.

The CBOE Emerging Markets ETF Volatility Index may be defined as up-to-the-minute market estimate of the expected 30-day volatility of EEM. It is calculated by using real-time bid/ask quotes of EEM options listed on CBOE, according to an exchange press release.

These new products have been designed for investors to either use one or both to hedge emerging markets volatility exposure or to trade emerging markets volatility.

One month later on Feb. 17, CBOE Holdings announced the launch of two additional ETF-based volatility index products.

CFE recently introduced the CBOE Brazil ETF Volatility Index security futures (VXEW), followed by CBOE’s debut of Brazil ETF Volatility Index options (VXEWZ).

Last year, EWZ options were the seventeenth most actively traded ETF option in the U.S., according to CBOE.

The CBOE has created a number ETF volatility benchmarks. It calculates and it distributes the following ETF volatility benchmarks: CBOE Crude Oil ETF Volatility Index (OVX); CBOE China ETF Volatility Index (VXFXI); CBOE Brazil ETF Volatility Index (VXEWZ); CBOE Gold Miners ETF Volatility Index (VXGDX); CBOE Silver ETF Volatility Index (VXSLV); CBOE Energy Sector ETF Volatility Index (VXXLE); CBOE EuroCurrency ETF Volatility Index (EVZ); and CBOE Gold ETF Volatility Index (GVZ).

In 2011, CBOE ETF options volume totaled 335.1 million contracts, up from 2010’s 274.2 million contracts. The contracts had a 2011 average daily volume of 1.3 million contracts, a 22 percent increase from 2010’s average daily volume of 1.1 million contracts in 2010.

In response to the product launches, CBOE Holdings Chairman and CEO William J. Brodsky said in a recent press release, “We continue to see tremendous interest in trading VIX options and futures and our other volatility-related products and we are committed to building our volatility franchise to meet this investor demand. Expanding our roster of volatility options and futures products into sectors such as emerging markets is the next step in this evolution.”

Last year, CBOE Holdings Inc. reported record-breaking revenues and earnings. Its average daily volume total was 4.83 million contracts, representing an eight percent rise.

It recently declared a quarterly cash dividend of $0.12 per share of common stock.

In a highly competitive exchange environment, CBOE will look to increase trading opportunities for investors and increase it shareholder value. Look for February volume numbers to come out for the exchange as well as for its competitors on March 1 or the following day.

For the month of January, the CBOE’s ETF options average daily volume was 1.06 million contracts, a four percent drop from January 2011’s 1.11 million contracts volume; it represented a seven percent rise from December 2011’s average daily volume of 996,300 contracts.

In January, CBOE’s five most actively traded index and ETF options included the S&P 500 Index (SPX), Standard & Poor’s Depositary Receipts (SPY), CBOE Volatility Index (VIX), iShares Trust-Russell 2000 Index Fund (IWM) and QQQ Trust (QQQ).

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