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SPX Variance Strips are designed to electronically trade a large and complex portfolio of S&P 500 options (SPX) in a single transaction, replicating S&P 500® implied variance exposure. Additionally, "V-Strips" will employ a quoting convention similar to that used in over-the-counter (OTC) variance trading.
Upon execution, matched SPX Variance Strip trades will be sent to a special post-trade system ("BasketWeaver(SM)") and will be broken up into as many as one thousand SPX contracts, which are then cleared by the Options Clearing Corporation (OCC).
"SPX Variance Strips add another unique way for customers to trade CBOE's growing family of exclusive S&P index offerings. Each of our S&P 500 index products meets specific customer needs in trading the S&P 500, and our new SPX Variance Strip process is expressly aimed at qualified professionals, including OTC users," CBOE Chairman and CEO
William J. Brodsky said. "At the core of creating SPX Variance Strips for these customers was the ability of our in-house systems team to customize the trading technology required to accommodate its unique construction. The new technology we designed to trade 'V-Strips' – called 'BasketWeaver' – is a prime example of how systems development can be leveraged to power product innovation at CBOE."
A detailed description of the SPX Variance Strip process, as well as a link to daily updates of information on the SPX options comprising SPX Variance Strips, can be accessed at
Among the points about SPX Variance Strips:
Prices will be quoted in volatility points (similar to OTC).
Trade quantities will be expressed in contracts; each variance strip "contract" features a multiplier (e.g., $25,000, $50,000, etc.) that reflects the aggregate vega exposure – sensitivity to the underlying instrument's volatility – of the SPX options comprising the variance strip.
The expiration date of the SPX variance strip will correspond to the expiration date of the SPX options series.
Page 2/2 – VSTRP Process to Begin July 27
CBOE Holdings, Inc. (NASDAQ: CBOE) is the holding company for
Chicago Board Options Exchange (CBOE), C2 Options Exchange and other subsidiaries. CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options trading through product innovation, trading technology and investor education. CBOE offers equity, index and ETF options, including proprietary products, such as S&P 500 options (SPX), the most active U.S. index option, and options on the CBOE Volatility Index (the VIX Index). Other products engineered by CBOE include equity options, security index options, LEAPS options, FLEX options, and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE is home to the world-renowned Options Institute and
www.cboe.com named "Best of the Web" for options information and education. CBOE is regulated by the Securities and Exchange Commission (SEC), with all trades cleared by the OCC.
Chicago Board Options Exchange®, CBOE Volatility Index®, FLEX®, Hybrid®, LEAPS® and VIX® are registered trademarks, and BuyWrite, BXM(SM), SPX(SM) and The Options Institute(SM) are service marks of
Chicago Board Options Exchange, Incorporated (CBOE). C2(SM), C2 Options Exchange(SM) and SPXpm(SM) are service marks of C2 Options Exchange, Incorporated (C2). Standard & Poor's®, S&P® and S&P 500® are registered trademarks of Standard & Poor's Financial Services, LLC and have been licensed for use by CBOE.
Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"), a subsidiary of The McGraw-Hill Companies, Inc. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). These trademarks have been licensed to S&P Dow Jones Indices LLC.