Larger version of VIX options

[FSU]

The CBOE Futures Exchange (CFE) offer the VX futures while the CBOE options exchange offers the VIX options on the VX future. Both are cash settled and there is no cross margining for customer accounts as the NFA/CFTC regulates futures and the SEC/FINRA regulates the option markets for CBOE options. With regard to VIX options, OI has nothing to do with depth and liquidity of those markets. All that matters is if the Market maker can hedge the trades. By the way, the VX future is 10X the size of the VIX options. The VX Future is $1000/Point while the VIX options is $100/Point.

Bob,
The way I have always understood it, the VIX options aren't options on the VX future. They are options on the VIX index. Both will settle for cash and you can use the VX future to hedge as they settle to the same thing (although cross margining is a problem as you mention). Similar to the SPX index options and the ES future. Although the ES future has options on the future itself, unlike VIX.

This is an important distinction as it allows the VIX options to be SEC regulated vs CFTC regulation on the future as you say.

 

[Robert Morse]

That is correct at expiration. https://www.cboe.com/tradable_products/vix/vix_options/ Before that, you will see that the back months correlate to the back month VX and calendar spreads in the options are treated differently than equity options as they are not on the same underlying.

Bob,
The way I have always understood it, the VIX options aren't options on the VX future. They are options on the VIX index. Both will settle for cash and you can use the VX future to hedge as they settle to the same thing (although cross margining is a problem as you mention). Similar to the SPX index options and the ES future. Although the ES future has options on the future itself, unlike VIX.

This is an important distinction as it allows the VIX options to be SEC regulated vs CFTC regulation on the future as you say.

 

[FSU]

That is correct at expiration. https://www.cboe.com/tradable_products/vix/vix_options/ Before that, you will see that the back months correlate to the back month VX and calendar spreads in the options are treated differently than equity options as they are not on the same underlying.

Not arguing with you here. Just pointing out that VIX options are not technically options on the VX futures (as you mentioned). They are options on the index itself. This was a very important distinction the CBOE made for regulatory reasons. Yes, they will correlate to that particular months future for pricing purposes.

 

[newwurldmn]

I'm a relatively small fish, and usually my trades contribute little to the overall daily volume of a product.

But with VIX options, I'm often the majority of the OI for a given contract.

Besides racking up commissions on hundreds of contracts, it also makes me wonder where the big players are trading. I looked at VX futures, but there is no option chain.

Are there any other ways to get exposure to VIX options? It would be great to find options with a multiplier of $1000 (like VX) or more.

I wouldn’t be worried about being a high OI. The market makers look at their risk in aggregate.

 

[guru]

I just didn't understand - you are saying that with IB you see options on the /VX futures? I didn't find those anywhere, and only see the VIX index options (multiplier $100).

Not sure how you're able to be profitable if you don't know this
VIX options are always on VIX futures, so "VX future options chain" is what you're trading. That's why VIX Calendars can have negative values like -$0.50 credit. Some people (Sosnoff) and funds lost millions by not realizing this, or miscalculating.
Such negative calendars aren't possible on equities and on indexes in general (except when accounting for dividends like on ^SPX).
Technically and for legal purposes these may be options on the future price of the index, but there is no practical difference since futures themselves are also based on the future price of the index.

The multiplier is indeed small, but commissions on VIX options are high and probably they want to keep it this way. You'd just need to trade 10x the volume and pay 10x the fees.

Though as others pointed, some people trade futures themselves in similar fashion. For example a calendar on VX futures (selling one VX future and buying another further out) is the same as buying VIX calendar using ITM options. And since you can hedge VIX options using futures then you can just as well do the opposite and emulate various options setups using futures themselves. Especially if you trade ITM options. It may be more difficult for OTM options, but generally the delta of your option combo at specific expiry should correspond to the amount of futures for the same expiry.