Derivatives and securities exchange network Cboe Global Markets, Inc has launched for trading Cboe MSCI World Index Options (MXWLD), Cboe MSCI ACWI Index Options (MXACW), and Cboe MSCI USA Index Options (MXUSA).
The launch is part of Cboe’s deepening relationship with MSCI Inc. (MSCI), a leading provider of critical decision support tools and services for the global investment community.
The three new MSCI index options are designed to provide a range of investors exposure to international, developed and emerging markets and U.S. equity market performance. The new Cboe MSCI index options can provide pension funds, insurance companies, and other institutional investors more efficient ways to hedge their global equity exposure, while minimizing potential tracking error and currency risk.
Additionally, each of MXWLD and MXUSA is based on a fraction (1/100th) of the value of its underlying index, making these options more accessible for retail investors.
“As more investors seek global equity exposure, adding three new options on MSCI’s world renowned benchmarks was the natural next evolution for Cboe’s suite of index options products,” said Catherine Clay, Head of Global Derivatives at Cboe Global Markets. “Whether investors are looking to hedge their portfolios, generate yields, or make directional trades, we have seen heightened interest in the optionality derivatives can provide. These new index options, and the MSCI volatility benchmark indices launched recently will provide important tools in helping investors manage their global exposures. We look forward to building upon our relationship with MSCI and providing investors the global risk management tools they need.”
For portfolio managers running options overlay strategies, these new index options are designed to allow investors to expand their overlay programs to their global portfolio and thus, diversify the sources of potential income in their portfolio. A potential benefit of overwriting the newly launched MSCI index options include their European-style cash settlement, which helps to eliminate risk of early exercise and physical settlement, two common pain points in running a yield enhancement strategy.
Cboe initially listed MXACW, MXUSA, and MXWLD with standard expiration on the third Friday of each month. Additionally, Cboe plans to list five end-of-week expirations that are 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 in addition to the currently listed Cboe MSCI tradable products, which include Cboe MSCI EAFE Index Options (MXEA) and Cboe MSCI Emerging Markets Index Options (MXEF). Recently, Cboe expanded its suite 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 by these respective MSCI index option classes. Similar to the VIX Index, which is designed to reflect investors’ consensus view of future (30-day) expected U.S. stock market volatility, the new Cboe MSCI Volatility Indices aim to provide comparable measures for international and emerging equity market volatility.
