By Saqib Iqbal Ahmed and Laura Matthews
NEW YORK, April 24 (Reuters) - Cboe Global Markets will launch a new volatility index on Monday that will
measure expected U.S. stock market swings far a given day, as
the U.S. derivatives exchange caters to growing investor
interest in trading short-dated options.
The Cboe 1-Day Volatility Index will measure the
expected volatility of the S&P 500 Index over any given
day using prices of S&P 500 options with one to zero day
expirations over a range of strike prices, the exchange said.
The index launch comes as trading in zero days to expiry or
ODTE options has boomed, making up nearly half of the daily
trading volume for S&P 500 options, per Cboe data.
"We developed VX1D to answer customer demand," said Rob
Hocking, head of product innovation at Cboe. "It provides the
granularity that the traditional 30-day VIX can't."
Coming three decades after the creation of the widely
watched Cboe Volatility Index - commonly referred to as
the Wall Street "fear gauge" - the short-dated index will use a
methodology similar to its older cousin but will likely be more
mercurial given its focus on a single day, the exchange said.
Investors have recently complained that the VIX - which
measures 30-day expected volatility of the S&P 500 Index based
on contracts with more than 23 days and less than 37 days to
expiry - is failing to capture the recent surge in trading
action in near-dated contracts.
The one-day VIX index would have more than doubled in value
from 15.30 to 40.19 between March 8 and March 13 as stocks
reacted to the recent bank crisis, according to a Cboe model. By
contrast, the VIX rose only to 26.52 from 19.11, or less than
40%, for that same period.
"It will be useful for investors to get a data point on very
near-term volatility," Chris Murphy, co-head of derivatives
strategy at Susquehanna International Group, said.
(Reporting by Saqib Iqbal Ahmed and Laura Matthews in New York
Editing by Matthew Lewis)
1971; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))
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