Cboe Global Markets is evaluating the introduction of perpetual futures based on the CBOE Volatility Index (VIX), according to a report from Bloomberg. The exchange operator is currently investigating the feasibility of these contracts as a means to provide investors with a more direct way to trade market sentiment and volatility. However, the official launch remains contingent on regulatory clarity regarding perpetual instruments within the United States financial markets.
Bridging the Gap in Volatility Exposure
Under the current market structure, the VIX index—often referred to as the "fear gauge"—is a calculation based on S&P 500 index options and cannot be traded directly. Investors seeking exposure must currently utilize secondary instruments such as standard futures or exchange-traded funds (ETFs). Rob Hocking, Global Head of Derivatives at Cboe, noted that clients have frequently inquired about obtaining spot-like exposure to the VIX.
- Perpetual futures lack a fixed expiration date, unlike traditional futures contracts.
- They allow for long-term positioning without the need to "roll" contracts monthly.
- This structure could simplify the process for retail and institutional traders to hedge against market turbulence.
Regulatory Hurdles and Risk Management
Despite the potential benefits, Hocking emphasized that options still hold specific advantages over perpetual contracts. He highlighted that options offer non-linear returns, which can be more efficient for certain hedging strategies. Specifically, the loss for an option buyer is strictly limited to the premium paid, whereas futures carry different risk profiles.
"Clients have been inquiring about how to gain VIX spot exposure, but there is no good way, and perpetual futures could be a good solution", Hocking stated, while also calling for regulators to provide more transparent guidance on the oversight of perpetual contracts in the U.
The move comes at a time when cryptocurrency exchanges have popularized perpetual swaps, leading traditional finance (TradFi) institutions to consider how these models could be integrated into regulated markets. If approved, a VIX perpetual future would represent a significant evolution in the derivatives ecosystem, allowing for more continuous price discovery of market volatility.
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