New data from CME Group, Cboe and global index provider FTSE Russell shows a broader set of retail investors utilizing futures products to address US small-cap equity market volatility.
The firms compared usage of CME Group’s Micro E-mini Russell 2000 futures contracts for retail investors since its launch in May 2019 to closing prices for the Cboe Russell 2000 Volatility IndexSM (RVXSM), a key measure of near-term US small-cap market volatility expectations as conveyed by Russell 2000 stock index option prices.
Data comparisons illustrate investor usage of the new contracts, which have a much lower financial threshold for participation, closely mirroring perceived US small-cap market volatility, particularly in the first two weeks of August when there was a spike in the RVX. During this 12-day trading period, the closing price of RVX averaged 22.2 as compared to a 19.6 average since the launch of the new futures, closing as high as 26.14 on August 6. During this same period, average daily volume on the CME Micro E-Mini Russell 2000 futures contracts was 64,878, more than double the 31,675 average daily volume since launch.
Tim McCourt, global head of equity index & alternative investment products, CME Group:
"Over the last few years, we have seen consistent growth in our Russell 2000 Index futures and options complex at CME and this trend has continued with the smaller contract size Micro E-mini Russell 2000 futures introduced in May. The successful launch and subsequent uptake in volume, coupled with the smaller contract size suggests that individual traders are looking for additional ways to both access and hedge US small-cap exposure."
Sean Smith, managing director, derivatives licensing, FTSE Russell:
“Volume and open interest for smaller size, retail investor-oriented futures based on the Russell 2000 Index relative to perceived US small-cap volatility this year help illustrate the growing popularity of index-based derivatives strategies by both institutional and retail investors to help manage portfolio risk while pursuing portfolio opportunities.”
For more information about the Russell US Indexes, please visit the FTSE Russell website.
© 2019 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc (“YB”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB. “FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “The Yield Book®”, and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE Canada, Mergent, FTSE FI, YB. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
Cboe®, Chicago Board Options Exchange®, Cboe Volatility Index®, and VIX® are registered trademarks of Chicago Board Options Exchange, Incorporated (Cboe). RVX is a service mark of Cboe. This data is believed to be correct but Cboe does not guarantee the accuracy of the data and will not be held liable for consequences of its use.
All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided “as is” without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the FTSE Russell Indexes for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell Indexes is provided for information purposes only and is not a reliable indicator of future performance.
Views expressed by Sean Smith of FTSE Russell and Tim McCourt of CME Group are as of November 13th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.
No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing contained in this document or accessible through FTSE Russell Indexes, including statistical data and industry reports, should be taken as constituting financial or investment advice or a financial promotion.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.
This publication may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of the LSE Group nor their licensors assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB and/or their respective licensors.