Cboe Explores Perpetual Futures for VIX
Wall Street is looking to adopt perpetual futures for the VIX, a product structure popularized by the crypto industry to eliminate the costs associated with contract expiries.
Cboe is exploring the launch of perpetual futures for the VIX, the index commonly referred to as Wall Street's fear gauge. The project remains in the early stages, with no formal filing or contract specifications currently available.
The VIX measures expected 30-day volatility for the S&P 500 based on options pricing. While a derivative market for the index already exists, traditional futures contracts require traders to roll their positions as they approach expiry. These rollovers can be costly and negatively impact returns, a challenge previously noted with Bitcoin futures ETFs.
Perpetual futures, which were proposed by economist Robert Shiller in 1993 and later commercialized by the crypto industry, do not expire. Instead, they utilize a funding rate mechanism to keep the contract price aligned with the spot index. This structure is intended to provide investors with a closer proxy to trading the underlying spot price.
Martin Lee, market insights lead at DWF Labs, noted that the removal of expiries allows traders to focus on the direction of the underlying asset. Lee suggested that the VIX is part of a broader trend of assets and metrics being perpified, with more expected in the coming months.
While some crypto exchanges like Gate have listed VIX/USDT perpetuals, these markets have seen little volume and remain highly illiquid. Additionally, Hyperliquid recently introduced futures tied to Volmex’s bitcoin implied volatility index.
Market makers face unique challenges with VIX products because the index is a mathematical calculation rather than a cash asset that can be easily bought or sold to hedge risk. Analysts at Marex Solutions pointed out that removing expiry does not eliminate basis risk or hedging costs, noting that the potential product would be a new volatility market rather than a cheaper substitute for options convexity.
The potential launch of VIX perpetual futures highlights the ongoing convergence between traditional and crypto market structures as both sectors look to support more advanced volatility products.
