The CME Group (Chicago Mercantile Exchange) announced new joint plans with Nasdaq today. The two will be launching a new futures contract on the Nasdaq-100 Volatility Index (VOLQ).
What does the new launch include?
VOLQ futures contract by CME Group will respond to the rising demand for tools that help in hedging portfolio volatility exposure. This is also a good tool for those who trade at-the-money volatility on the Nasdaq 100. The new futures contracts will be launched on October 5, pending a regulatory review.
The VOLQ Index was introduced by Nasdaq in early 2019. It measures the 30-day implied volatility of the Nasdaq-100 Index (NDX) which helps the market participants and understanding and managing their portfolio volatility better. The real-time volatility index is defined by the prices of some listed NDX options that help obtain precise at-the-money options prices. These are the most commonly used options by the market participants. This approach helps volatility traders in using an implied volatility index that is focused extensively on options used by hedgers, strategists, and traders.
How will the contracts be settled?
The CME futures contract will be settled in cash based on the VOLQ Index. One contract will be equal to $1,000 multiplied by the index. The futures will be subject to the rules of the CME. Tim McCourt, the Global Head of Equity Index and Alternative Investment Products commented on the launch and acknowledged the long-standing and successful relationship with Nasdaq on offering the new futures contract.
“VOLQ futures respond directly to growing demand for tools to hedge portfolio volatility exposure or trade at-the-money volatility on a leading global benchmark equity index, the Nasdaq-100. Additionally, they will complement our deeply liquid Nasdaq futures and options product line, including the benchmark E-mini and Micro E-mini Nasdaq-100 contracts.”
EVP and Head of Global Information Services at Nasdaq, Lauren Dillard noted that the Nasdaq-100 index is tracking the most innovative companies in the world which have shown great resilience and strength with its outstanding performance. The launch of VOLQ futures is a good step in bringing more innovative products centered on market volatility for the investors.