CME Group will launch the VolQ futures contract on October 5, 2020, pending all regulatory approvals.
The Nasdaq-100 Volatility Index (VOLQ) measures expected volatility of the Nasdaq-100 Index over the upcoming 30 calendar days. The VOLQ Index is quoted in percentage points per annum. For example, an index level of 16.00 represents an annualized volatility of 16 percent.
The VOLQ Index derives its value from 32 different Nasdaq-100 Index options, with the aim of obtaining multiple synthetic, precisely at-the-money (ATM) option prices, utilizing NBBO (National Best Bid/Offer) data from three separate exchanges.
The synthetic ATM options prices are derived from first and second level out-of-the-money puts and calls, as well as the first and second level in-the-money puts and calls, totaling eight options per expiration. This process is repeated for 4 expirations that straddle the 30-day mark, for volatility interpolation purposes.
The resultant calculation is a mathematically robust, closed form measure of at-the-money volatility.
VOLQ approaches measurement of volatility through a unique proprietary methodology. Other volatility indices, for instance, have utilized a variance swap-based method, requiring the input of many option strikes.
The number of options included in such variance swap-based measures can vary materially contingent on the available bid prices of several dozen options at the time of measurement. Additionally, the variance swap measure will capture both at-the-money volatility as well as convexity reflected in the ‘wings’ of the variance swap (i.e., deep out of the money options with low delta).
Alternatively, VOLQ will be based on 32 options, proximate to the at-the-money level, and thus produces an annualized measure focused on at-the-money volatility.
|Index futures contract||Outright||Calendar spread||Multiplier||Example price||Example contract value|
|VolQ Index futures||0.05 Index points= $50||0.01 index points= $10||$1,000||16.00||$16,000|
|Index futures contracts||Underlying index (Bloomberg)||CME Globex||Bloomberg front month||Thomson Reuters front month|
|VolQ Index futures||VOLQ||VLQ||VQOA Index||1VQL|
Serial listing of three consecutive monthly contracts.
Sunday – Friday 6:00 p.m. – 5:00 p.m. ET with a trading halt from 4:15 p.m. – 4:30 p.m. ET
Settlement for VolQ futures will be determined using a VWAP (4:14:30-4:14:59 ET) to calculate the lead month; spread information is utilized to derive back month settlements.
No TAS contracts will be listed at this time.
Trading terminates at 9:30 a.m. ET, 30 days prior to the 3rd Friday of the following month, typically a Wednesday. In the case of index closure on such 3rd Friday, and resultant option expiration on the 3rd Thursday (example: Good Friday), trading would still terminate 30 days before the subsequent monthly options expiration; in this example, VolQ trading would terminate on a Tuesday.
VOLQ is a financially settled product. The final settlement price will be determined by a Closing Volume Weighted Average Price calculation. The Closing VWAP is calculated over a period of five minutes at the end of individual one-second time observations commencing at 9:32:00 A.M. and continuing each second for the next 300 seconds. The number of contracts traded on Nasdaq PHLX LLC (“Phlx”) at each price during the observation period is multiplied by that price to yield a Reference Number. All Reference Numbers, for each second, are then summed and that sum is divided by the total number of contracts traded during the observation period to calculate a Volume Weighted Average Price (VWAP) for that observation period for that component.
Each one-second VWAP for each component option is then used to calculate the VOLS, resulting in the calculation of 300 sequential VOLS values. Finally, all 300 values will be arithmetically averaged (i.e., the sum of 300 Volatility Index calculations is divided by 300) and the resulting figure is rounded to the nearest 0.01 to arrive at the settlement value disseminated under the ticker symbol VOLS.
Yes, they will be subject to a 50 minimum block threshold.
VolQ futures will be listed on the CME DCM and will follow the E-mini futures fees according to the CME Fee Schedule.
Margins are based on current market conditions and are subject to change. Initial margin requirement will be 45%-55% of current notional ($15,000 to $18,000) on short side, and 25%-30% of current notional ($8,000 to $10,000) on long side.
Learn more about margins:
CME Group plans to introduce a market maker program to assure continuous two-sided markets are quoted on-screen throughout the trading day.
Delayed quotes will be available online on the CME Group website. You can also access quotes through major quote vendors.
To access CME Globex, you must have a relationship with a CME Clearing member firm.
Visit cmegroup.com/volq for the latest information. You can fill out the form on this page to stay informed of VolQ product updates.
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