Cboe launches MSCI index options to address investor demand for global exposure

Rick Steves

“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.”

Cboe Global Markets has further expanded its suite of MSCI tradable products, this time focused on index options for exposure to the world and to the United States.

The leading derivatives exchange has launched Cboe MSCI World Index Options (MXWLD), Cboe MSCI ACWI Index Options (MXACW), and Cboe MSCI USA Index Options (MXUSA) for trading.

European-style cash settlements to avoid early exercise and physical settlement issues

The newly introduced index options aim to provide investors, including pension funds and insurance companies, with efficient ways to hedge against global equity market fluctuations. Notably, MXWLD and MXUSA are pegged to 1/100th of their respective index values, enhancing accessibility for retail investors.

The options, featuring European-style cash settlements to avoid early exercise and physical settlement issues, are seen as particularly beneficial for portfolio managers employing options overlay strategies. This flexibility allows for diversification and potential income enhancement across global portfolios.

Initially, MXACW, MXUSA, and MXWLD options will be listed with standard monthly expirations. Plans for listing additional end-of-week expirations, starting March 21, 2024, are also underway. These offerings join Cboe’s existing MSCI EAFE and Emerging Markets index options, alongside the newly developed Cboe MSCI EAFE and Emerging Markets Volatility Indices. These volatility indices, based on Cboe’s proprietary VIX Index methodology, provide insights into the expected 30-day implied volatility of international and emerging equity markets, analogous to the U.S. stock market’s VIX Index.

“Important tools in helping investors manage their global exposures”

Catherine Clay, Head of Global Derivatives at Cboe Global Markets, said: “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. 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.”

The Cboe MSCI World Index Options (MXWLD), Cboe MSCI ACWI (All Country World Index) Index Options (MXACW), and Cboe MSCI USA Index Options (MXUSA) are all designed to offer investors diverse mechanisms for exposure to various segments of the global equity market through options trading. Each of these products is tailored to different market scopes and investor needs, from global to specific national markets.

MXWLD (Cboe MSCI World Index Options)

MXWLD options are based on the MSCI World Index, which is a benchmark designed to reflect the performance of stocks in developed markets worldwide. It includes stocks from 23 developed countries, offering broad exposure across North America, Europe, and the Asia-Pacific region. The MXWLD options are cash-settled and pegged at 1/100th of the value of the MSCI World Net Total Return USD Index, making them accessible for a wide range of investors. This setup allows for efficient management of global equity exposures and portfolio diversification​​.

MXACW (Cboe MSCI ACWI Index Options)

While specific details about MXACW were less directly provided in the sources, the MSCI ACWI (All Country World Index) generally represents both developed and emerging markets, providing a comprehensive view of the global equity market. The MXACW options likely offer investors the ability to hedge or gain exposure to the global equity market as a whole, including both developed and emerging countries. This broad coverage makes it an essential tool for investors looking to manage global investment risks or to diversify portfolios with a single product.

MXUSA (Cboe MSCI USA Index Options)

MXUSA options are derived from the MSCI USA Index, which focuses exclusively on the U.S. equity market. Like the MXWLD, these options are cash-settled and based on 1/100th of the index value, aimed at providing investors with a mechanism to hedge or gain exposure to the U.S. stock market’s performance. This index is composed of large- and mid-cap companies, reflecting the broader U.S. equity landscape. It’s an efficient way for investors to manage their exposure to the U.S. market, whether they’re looking to hedge existing portfolios or speculate on future market movements​​​​.

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