Investors are getting new ways to wager on turbulent markets in Europe just days before a closely-watched presidential election in France.
The first U.S. exchange-traded products linked to the VSTOXX index, a European variation of the CBOE Volatility Index, Wall Street’s fear gauge, are set to make their debut Wednesday. The VelocityShares 1X Long VSTOXX Futures ETN, under the ticker EVIX, and the VelocityShares 1X Inverse VSTOXX Futures ETN, ticker EXIV, will track VSTOXX futures on Deutsche Borse’s Eurex futures exchange.
Interest in trading VSTOXX has increased in recent months amid the rise of nationalist politics and the U.K’s exit from the European Union. In March, U.K. Prime Minister Theresa May initiated formal negotiations to leave the EU. And in France, where the presidential election is scheduled for May 7, candidate Marine Le Pen, leader of the far-right National Front, has pledged to pull France from the eurozone.
Trading volume of VSTOXX futures and options rose 97% in the first quarter of 2017 compared with last year, according to Deutsche Borse AG’s Eurex exchange.
“People trading U.S. volatility have wanted exchange-tradeable European volatility for a very, very long time,” said Nick Cherney, head of exchange-traded products for Janus Capital Group, the owner of VelocityShares.
The new VelocityShares products expand the lineup of popular products pegged to CBOE’s index, known as the VIX. There are 15 VIX with almost $3.2 billion in assets. VelocityShares accounts for six of those, with assets of more than $1 billion.
The VIX uses options on the S&P 500 stock index to measure traders’ expectations for U.S. stock market swings. VSTOXX is similar, but uses options prices on the EuroSTOXX 50 index to gauge European market sentiment. The indexes typically rise when equities fall, making them an attractive basis for insurance against sudden market downturns.
If the history of exchange-traded VIX in the U.S. is any guide, the two new VelocityShares products may spur growth in Europe’s nascent volatility market, said Mr. Cherney, who helped launch the first exchange-traded VIX product when he was at Barclays
Exchange-traded VIX products have won a huge following in the U.S. since Barclays listed the first one in 2009. Before their debut, the VIX market was limited to futures, options and over-the-counter trades. The advent of the Barclay’s product and its successors opened up VIX trading to anyone with a brokerage account, allowing investors to trade VIX just like any other stock.
May 03, 2017 at 07:11PM
from Asjylyn Loder and Chris Dieterich
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