In ch?ice but n?t the ?bligati?n t? buy
In 2006, CB?E intr?duced f?r the first time ever ?pti?ns written ?n the
VIX index. ?pti?ns are pr?ducts that are traded in exchanges and in the ?ver
the c?unter market. There are tw? categ?ries ?f ?pti?ns. The first ?ne are the
call ?pti?ns and the sec?nd ?ne the put ?pti?ns. A call ?pti?n gives the h?lder the ch?ice but
n?t the ?bligati?n t? buy the underlying asset at a fixed date and at a certain
price. ?n the ?ther hand, a put ?pti?n gives the h?lder the ch?ice but n?t the ?bligati?n
t? sell the underlying asset at a fixed date and at a certain price. B?th call
and put ?pti?ns are written ?n an underlying asset. The VIX ?pti?ns are written
?n the VIX index. Invest?rs wh? believe in the increase ?f the market v?latility
can buy VIX calls and take advantage ?f that m?ve. ?n the ?ther hand, many
invest?rs use VIX ?pti?ns as hedging t??ls. An invest?r can ch??se am?ng many
etc.) which is the m?st pr?fitable.
VIX ?pti?ns have s?me distinct characteristics which make them different
fr?m the ?ther index ?pti?ns. S?me ?f th?se characteristics are the f?ll?wing.
The pricing ?f VIX ?pti?n is based ?n f?rward VIX value. The settlement takes
place every Wednesday. Furtherm?re, there is a negative c?rrelati?n t? the st?ck
index. And the ?pti?n have a high v?latility ?f v?latility.
?n ?ct?ber 8,
2015 VIX Weeklys ?pti?ns began trading at Chicag? B?ard ?pti?ns Exchange, Inc?rp?rated
(CB?E®). T?day, SPX Weeklys acc?unt f?r ?ne-third ?f all SPX ?pti?ns traded,
and average ?ver a quarter ?f a milli?n c?ntracts traded per day. SPX Weeklys
currently represent appr?ximately 30% ?f all SPX ?pti?ns v?lume.
1 Bull spread is a speculative
strategy for which the investors buy one option with the low strike price and
sell one option with the high strike.
2 Bear spread is a speculative
strategy for which the investors sell one option with the low strike price and
buy one option with the high strike