Russell 2000 will get its own VIX
Chris McKhann | [email protected]
The CBOE is relaunching options on its Russell 2000 Volatility Index on Dec. 2. The RVX is like the VIX but is calculated on the options of the Russell 2000 instead of the S&P 500.
Like the VIX options, those of the RVX will be based on their respective futures, not the spot index. Those futures began trading last week.
These options and futures are were first introduced before the 2008 financial crisis, but volumes dried up. The CBOE is hoping they gain more traction this time around.
These contracts should provide interesting hedging opportunities for those who have portfolios that are weighted more heavily in the small-cap names that compose the Russell 2000. They may also provide opportunities for "relative volatility" trades. Although that may be beyond the scope of most traders, this type of analysis can show the least expensive way to hedge long-equity portfolios.