An October 17 press release introduced a new corporate name -- Cboe Global Markets -- that “builds on the brand capital of CBOE and the global reach of the Bats business. In Cboe Global Markets, the word ‘Cboe’ is titlecase vs. uppercase … This subtle change signals how the company has greatly expanded beyond its options heritage to a business with multiple asset classes and a much larger global footprint.”
Below is an update with ten charts that show growth in 2017 for some of the many index products offered by the marketplaces of Cboe Global Markets.
CAPACITY AND NOTIONAL VALUE OF SPX OPTIONS VOLUME
When I am discussing the Cboe’s BXM and PUT indexes with institutional investors, common questions I hear include – What about the capacity of the options markets? Can the options markets handle an influx of billions of dollars of new allocations by pension and endowment funds? In my answer to these questions, I usually present a chart on the notional value of average daily volume for the S&P 500® (SPX) options, which has more than doubled over the past five years. The notional value of the SPX index options volume has been much higher than that of options on single stocks. www.cboe.com/SPX.
VIX OPTIONS VOLUME
In 2017 (through September) the average daily volume for options on the Cboe Volatility Index® (VIX®) was 738,810, which was about 26% higher than the average daily volume for the full year of 2016. This volume growth occurred despite the fact that the average daily closing value for the VIX Index in 2017 year-to-date is around 11.3. www.cboe.com/VIX.
VIX FUTURES VOLUME
The average daily volume for VIX futures on Cboe Futures Exchange has grown every year in the past decade. www.cboe.com/VIX.
SPXW WEEKLY OPTIONS AND TARGETED PORTFOLIO MANAGEMENT OPPORTUNITIES
Cboe Options Exchange now offers SPXW Weekly options with p.m.-expirations on Mondays, Wednesdays and Fridays. SPXW Weekly options can provide opportunities for investors to implement more targeted buying, selling or spreading strategies. Specifically, SPXW Weeklys may help investors efficiently take advantage of market events, such as earnings, government reports and Fed announcements. Average daily volume for SPXW Weekly options grew from 99,358 in 2012 to around 500,000 this year. www.cboe.com/SPXW.
BENCHMARK INDEXES - BXMD, PUT AND BXM
Cboe Options Exchange offers dozens of benchmark indexes designed to show the hypothetical performance of strategies that use index options. As shown in the chart below, from mid-1986 through last month, the Cboe S&P 500 30-Delta BuyWrite Index (BXMD) rose 2313%, the Cboe S&P 500 PutWrite Index (PUT) rose 1910%, and the Cboe S&P 500 BuyWrite Index (BXM) rose 1350%. In addition, the BXMD, PUT, and BXM all had much less volatility than the S&P 500 and S&P GSCI indexes.
Here are the percentage gains in 2017 (through October 13) for six benchmark indexes -
- 12.9% Cboe S&P 500 30-Delta BuyWrite Index (BXMD)
- 12.2% Cboe S&P 500 Covered Combo Index (CMBO)
- 11.4% Cboe S&P 500 95-110 Collar Index (CLL)
- 11.0% Cboe S&P 500 Zero-Cost Put Spread Collar (CLLZ)
- 10.3% Cboe S&P 500 BuyWrite Index (BXM)
- 8.7% Cboe S&P 500 PutWrite Index (PUT)
White papers and more information on Cboe benchmark indexes are at www.cboe.com/benchmarks.
SOCIAL MEDIA INDEXES
Cboe Options Exchange and Social Market Analytics (SMA) are partnering in the development of a suite of innovative indexes based on SMA data, the CBOE-SMA Index Suite. SMA applies its patented account certification algorithm to extract predictive signals from Twitter traffic by passing tweets through their proprietary NLP architecture to generate different S-Factors that reflect investors' sentiment about stocks. CBOE SMA Indexes are designed to provide unique measures of the premia generated by a new "social media momentum" factor. Each index in the CBOE-SMA Index Suite will track the performance of a portfolio of stocks or options referenced to a defined universe of stocks. Each portfolio will be rebalanced frequently, e.g. on a daily or weekly basis, to maximize the value of SMA signals. As shown in the chart below, from December 31, 2014, through October 12, 2017, the Cboe-SMA Large-Cap Index (SMLC) rose 55% while the S&P 500 Index rose 24%. www.cboe.com/SMLC.
RUSSELL 2000 (RUT) WEEKLY OPTIONS
The maximum open interest for the Russell 2000® (RUT) Weekly options at Cboe rose from 84,725 in January 2017 to more than 140,000 this month. RUT Weekly options can provide opportunities for investors to implement more targeted buying, selling or spreading strategies. www.cboe.com/RUT.
GLOBAL EXPOSURE AND OPTIONS ON MSCI EMERGING MARKETS INDEX (MXEF)
The maximum open interest for options the MSCI Emerging Markets Index (MXEF) at Cboe rose from 2,677 in January 2017 to 11,513 last month. MXEF options are used to help manage portfolio exposure to equities in volatile emerging markets. www.cboe.com/MXEF.
GLOBAL EXPOSURE AND OPTIONS ON MSCI EAFE INDEX (MXEA)
The maximum open interest for options the MSCI EAFE Index (MXEA) at Cboe rose from 4,171 in January 2017 to 25,054 last month. MXEA options are used to help manage portfolio exposure to equities in global developed markets. www.cboe.com/MXEA.
HIGHER SKEW INDEX IN 2017
In early 2017 the minutes of the U.S. Federal Reserve Board “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty …”, and several observers this year have noted that the VIX Index has been well below its long-term average in 2017. Is there too much complacency in the equity markets? One gauge, the Cboe SKEW Index, hit an all-time high of 154.34 on March 17, 2017, and the SKEW Index has been well above its long term average during most of 2017. A relatively high level of the SKEW Index indicates that there is investor fear of big future losses in the markets. www.cboe.com/SKEW.
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