Preparing for November: 14% Election Bump for VIX® October Futures

This Index Insights Monthly Scorecard provides an update on the performance of indices that track the levels of volatility or the performance of hypothetical strategies that invest in options or futures.

Highlights:

• 14% Election Bump for VIX® Futures Expiring in October
• 5-Year Gains: 117.3% for Cboe VIX Tail Hedge Index (VXTH) and 73.5% for the Cboe Validus S&P500 Dynamic Call BuyWrite Index (CALD)  
• Average monthly gross premium yield for Cboe Russell 2000 Buywrite Index (BXR) was 2.5%

14% Election Bump for VIX Futures Expiring in October

At the end of April, the settlement price for VIX futures expiring on October 16 was 19.87, more than 14% higher than the 17.35 price for VIX futures expiring on September 18, as seen in the chart below. The VIX futures expiring on October 16have the potential to be used as a hedge against the possibility of much higher volatility that may occur around the 2024 U.S. presidential election on November 5.

Source: Cboe Global Markets

Read More about How Investors Are Preparing for Volatility around Elections:

• Financial Times | Traders bet US election will unsettle market calm VIX and VStoxx indices show expectations of volatility around prospective Biden-Trump rematch.
• Bloomberg | Traders Bid Up Newest VIX Contract to Hedge Trump-Biden Risks. VIX October futures, which encompass vote, begin trading. Gap between October, September contracts wider than 2020, 2016.

Scorecard for 27 Indices

Indices with large five-year gains in the table below include: 

• VXTH^SM | Cboe VIX Tail Hedge Index (up 117.3%)
• VPN^SM | Cboe Capped VIX Premium Strategy Index (up 101.9%)
• CALD^SM | Cboe Validus S&P 500 Dynamic Call BuyWrite Index (up 73.5%)
• PPUT^SM | Cboe S&P 500 5% Put Protection Index (up 64.9%)

Source: Cboe Global Indices

Higher Yield for Writing of Russell 2000 Options

The Russell 2000® Index is the leading benchmark index for small-cap U.S. equity exposure. The Russell 2000 Index has historically had more implied volatility than the S&P 500 Index, and so certain options strategies that write options on the Russell 2000 Index may have the potential to generate more gross yield than similar strategies that write options on the S&P 500 Index. The average monthly gross premium yield since September 2018 was 2.5% for the Cboe Russell 2000 BuyWrite Index (BXR^SM) and 1.8% for the Cboe S&P 500 BuyWrite Index (BXM^SM).

Source: Cboe Global Indices

Learn more about Income Generation and Cboe Russell 2000 Indices – BXR^SM, BXRD^SM, and PUTR^SM

More Information

Learn more about Cboe Global Indices and related options and futures strategies:

• Cboe Buffer Protect Indices for Risk Reduction and Smoother Returns (White Paper by Professor Oleg Bondarenko and Professor Dmitriy Muravyev)
• Income Generation Strategies
• Portfolio Protection Strategies
• Cboe’s Insights Webinar Series Replays
• Cboe 2024 Risk Management Conference in Utah (October 15 – 18)
• Global Option-Writing Strategies to Reduce Risk and Enhance Income (White Paper by Wilshire)
• The VIX^® Index and Volatility-Based Global Indexes and Trading Instruments - A Guide to Investment and Trading Features (White Paper)
• Data and Access Solutions

There are important risks associated with transacting in any of the Cboe Company products or any digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers contained at: https://www.cboe.com/us_disclaimers/. These products and digital assets are complex and are suitable only for sophisticated market participants. These products involve the risk of loss, which can be substantial and, depending on the type of product, can exceed the amount of money deposited in establishing the position. Market participants should put at risk only funds that they can afford to lose without affecting their lifestyle. © 2024 Cboe Exchange, Inc. All Rights Reserved.