/VX

/VX is the ticker symbol for the CBOE VIX Index Futures. While the cash VIX index is derived from SPX option prices, VIX futures are priced by the marketplaces anticipation of the 30-day market volatility.

The /VX is closely related to the VIX as it trades in anticipation of the future price of the VIX index. The VIX futures are worth $1,000 per point and the minimum interval for individual investors to participate in for each tick is .05 points, or $50.

Now that you understand what the VIX futures are, it is important to understand how to trade them. As contrarians, when volatility gets to a low extreme, we at tastytrade will sometimes use VIX futures to take advantage of any increase in volatility. Another instance we might use the /VX is to hedge an existing position.

When making trades in the /VX, it is important to note that unlike option contracts that expire the third Friday of every month, VIX futures and options usually expire on the Wednesday of expiration week. However, because the VIX products expire 30 days before the following expiration, four times a year, they will expire the Wednesday after expiration week. At expiration, /VX is settled to cash based on the final at the money settlement price. In order to avoid settlement risk, we at tastytrade will often exit or roll our futures position prior to expiration in order to prevent this from occurring. Along with understanding expiration, it is also important to note the cost to carry the /VX, which can sometimes be as expensive as $1,000 per contract or more per expiration cycle.

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