Cboe explores perpetual futures on the VIX, Bloomberg reports; no filing yet
In brief
- Cboe is exploring perpetual futures on the VIX, Bloomberg reported via CoinDesk's Daybook newsletter.
- The effort is preliminary, with no contract specs or filing. Cboe hasn't confirmed it in the source.
- Perpetual futures never expire and use a funding rate to track the spot index.
- CoinDesk flagged funding costs and hedging difficulty because the VIX isn't a tradable asset.
What the VIX measures
The VIX Index measures the expected 30-day volatility of the S&P 500, based on options pricing. Investors buy options to protect themselves against fast market drops, so demand for those contracts climbs during downturns and pushes the index higher (that's where the "fear gauge" nickname comes from).
It isn't a new market. According to CoinDesk, the VIX already has futures, options and exchange-traded products that track it.
Why a perpetual
Standard futures expire. Traders have to roll their positions into the next contract, and CoinDesk said those rollovers are costly and drag on returns, the same criticism bitcoin futures ETFs faced when they launched in late 2021.
Perpetual swaps don't expire at all.
Instead, they use a funding rate mechanism to anchor the contract price to the spot index. Economist Robert Shiller proposed the design in 1993, and it was the crypto industry that commercialized it, per CoinDesk's Daybook.
Crypto venues are already circling volatility. Some exchanges, Gate among them, list VIX/USDT perpetuals, although CoinDesk described that market as highly illiquid with little noticeable volume. Hyperliquid recently listed futures tied to Volmex's bitcoin implied volatility index (which the newsletter called bitcoin's VIX).
The catch
The newsletter's analysis said a launch could draw more traders into volatility markets and pull the various VIX products into closer agreement. It also flagged two problems. Perpetuals still carry costs in the form of funding payments. And because the VIX is a mathematical calculation rather than a tradable asset, market makers can't easily trade the "spot" to hedge their risk, according to CoinDesk.
CoinDesk said Cboe's plan shows how quickly traditional and crypto market structures are converging to support advanced volatility products. For now, there's no spec sheet and no filing.
Frequently asked questions
What is a perpetual future?
A perpetual swap is a futures-style contract that never expires. It uses a funding rate mechanism to anchor the contract price to the spot index. Economist Robert Shiller proposed the design in 1993, and the crypto industry commercialized it.
Why would VIX traders want a perpetual contract?
Standard VIX futures expire, so traders have to roll positions into the next contract. CoinDesk said those rollovers are costly and drag on returns, the same criticism bitcoin futures ETFs faced in late 2021. Perpetuals avoid expiry entirely.
What are the drawbacks of VIX perpetuals?
According to CoinDesk's newsletter commentary, perpetuals still carry costs through funding payments. Because the VIX is a mathematical calculation rather than a tradable asset, market makers can't easily trade the spot to hedge their risk.
