Futures on the CBOE DJIA Volatility Index (VXD)
The CBOE DJIA Volatility Index (VXD) is based on real-time prices of options on the Dow Jones Industrial AverageSM (DJIA, with an options ticker of DJX), and is designed to reflect investors' consensus view of future (30-day) expected stock market volatility. The CBOE Futures Exchange, LLC, (CFE) introduced CBOE DJIA Volatility Index Futures on Monday, April 25, 2005. For additional information, visit the "Products" section of the CFE Site or review the Press Releases below.
Consultant's Study on the CBOE DJIA Volatility Index (VXD)
In 2007 the Fund Evaluation Group (FEG) issued a
new study entitled "Evaluation of BuyWrite and Volatility Indexes - Using the CBOE DJIA BuyWrite Index (BXD) and the CBOE DJIA Volatility Index (VXD) for Asset Allocation and Diversification Purposes." The paper studied the 109-month period from October 1997 to November 2006. The FEG study presented several findings on the 9-year performance of the VXD Index, including:
- Volatility Index Can Reduce Portfolio Volatility. Including a small (10%) allocation to the CBOE DJIA Volatility Index (VXD) could have reduced the volatility of an all-stock portfolio by about 26%, without materially affecting returns.
- Low Correlation and Diversification. The VXD and the DJIA were inversely correlated (-0.62) over the course of this study. The study showed that VXD increased more during market declines (VXD reacted more to stock market declines than to stock market advances), indicating that VXD has potential as a diversification tool.
- Impact on Risk-Adjusted Returns. The inclusion of a small (5%) allocation to the VXD Index boosted risk-adjusted returns for a stock-oriented portfolio, and lowered the risk-adjusted returns for a fixed-income-oriented portfolio.
Click here for a link to the study.
Press Releases
VXD Price History
Rescaling of VIX Futures Contracts effective March 26, 2007 - CFE Information Circular
CBOE DJIA Volatility Index (VXD)—One-year Graph
CBOE DJIA Volatility Index (VXD)—Five-year Graph
Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (ODD). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606. CBOE® and Chicago Board Options Exchange® are registered trademarks of Chicago Board Options Exchange, Incorporated. "Dow Jones", "The Dow", "DJIA" and "Dow Jones Industrial Average" are registered trademarks of Dow Jones & Company, Inc. CBOE's Options on the Dow based on the Dow Jones Industrial Average and financial products based on the CBOE DJIA Volatility Index are not sponsored, endorsed, marketed or promoted by Dow Jones. The methodology of the CBOE DJIA Volatility Index is owned by CBOE and published pursuant to an agreement with Dow Jones. This document contains comparisons, assertions, and conclusions regarding the performance of index based on backtesting, i.e., calculations of how the index might have performed in the past if it had existed. Backtested performance information is purely hypothetical and is provided in this document solely for informational purposes. Backtested performance does not represent actual performance, and should not be interpreted as an indication of actual performance. Investors attempting to replicate the VXD Index should discuss with their brokers possible timing and liquidity issues. Past performance is not indicative of future results. The methodology for the VXD Index is subject to change. Copyright© 2009 Chicago Board Options Exchange, All Rights Reserved. |