The Cboe Global Markets, Inc derivatives and securities exchange network has launched Cboe MSCI World Index Options (MXWLD), Cboe MSCI ACWI Index Options (MXACW) and Cboe MSCI USA Index Options (MXUSA) for trading.
The launch is part of Cboe’s deepening relationship with MSCI Inc. (MSCI), a leading provider of critical decision support tools and services to the global investment community.
The three new MSCI index options are designed to provide a range of investors with exposure to international, developed and emerging markets and US equity market performance. The new Cboe MSCI index options can provide pension funds, insurance companies and other institutional investors with more efficient ways to hedge their global equity exposure while minimizing potential tracking error and currency risk.
In addition, each of MXWLD and MXUSA is based on a fraction (1/100th) of the value of its underlying index, making these options more affordable for retail investors.
“As more investors seek global equity exposure, the addition of three new options to MSCI’s world-renowned benchmarks was the natural next evolution for Cboe’s index options product line,” said Catherine Clay, head of Global Derivatives at Cboe Global Markets. “Whether investors are looking to hedge their portfolios, generate returns or make directional trades, we’ve seen increased interest in the optionality that derivatives offer. These new index options and the recently launched MSCI volatility benchmarks will provide important tools to help investors manage their global exposures. We look forward to building our relationship with MSCI and providing investors with the global risk management tools they need.”
For portfolio managers executing option overlay strategies, these new index options are designed to allow investors to expand overlay programs across their global portfolio and thereby diversify the sources of potential income in their portfolio. One potential benefit of replacing the recently launched MSCI index options is European-style cash settlement, which helps eliminate the risk of early exercise and physical settlement, two common pain points in executing an outperformance strategy.
Cboe originally introduced MXACW, MXUSA and MXWLD with a standard expiration on the third Friday of each month. In addition, Cboe plans to list five week-end expirations expected to begin trading on March 21, 2024. The three new Cboe MSCI index options are available for trading on the Cboe Options Exchange.
The new index options are added to Cboe MSCI’s currently listed tradable products, which include Cboe MSCI EAFE Index Options (MXEA) and Cboe MSCI Emerging Markets Index Options (MXEF). Recently, Cboe expanded its line of volatility indices with the Cboe MSCI EAFE Volatility Index (VXMXEA) and the Cboe MSCI Emerging Markets Volatility Index (VXMXEF). Developed using Cboe’s proprietary VIX® Index methodology, these indices are based on existing MXEA and MXEF options and are designed to provide a transparent measure of the market’s expectation of 30-day implied volatility of these respective MSCI index option classes. Similar to the VIX Index, which is designed to reflect investors’ consensus view of future (30-day) expected US stock market volatility, the new Cboe MSCI Volatility Indices aim to provide comparable measures of international and emerging equity markets.