Cboe Announces Launch of New Cboe 3-Month Implied Correlation Index

CHICAGO, July 1, 2021 /PRNewswire/ -- Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today announced it is publishing intraday values for the Cboe 3-Month Implied Correlation Index (ticker symbol: COR3M), a new benchmark index that is designed to provide market participants with further granularity into some of the factors driving volatility in the equity markets.

Correlation is a risk management tool generally used by market participants to set systematic risk exposure levels and maximize risk diversification benefits. Cboe's Implied Correlation Index is a financial benchmark that is designed to provide near instantaneous market estimates of expected correlation between implied volatilities of the S&P 500 Index (SPX) and SPX component options. This index is expected to form an essential tool to help identify some of the drivers of implied volatility for the SPX and help evaluate the implications of major macroeconomic shocks on market expectations.

The Cboe 3-Month Implied Correlation Index uses an enhanced methodology – relying on 3-month at-the-money (ATM) index options trading day implied volatilities from Cboe Hanweck – to measure the 3-month expected average correlation across the top 50 value-weighted stocks in the S&P 500 Index. By calculating implied volatilities using Cboe Hanweck's robust options analytics, the index is able to help quantify market sentiment, estimate the size of the movement an asset may take and in the pricing of options contracts. The basket portfolio of 50 stocks used to calculate the index is identified on the trading date prior to the index calculation date and is adjusted for market events such as acquisitions, mergers and spinoffs.

"As the pioneer in the volatility space, Cboe has established a widely followed suite of tradable volatility products and indices that help quantify forward-looking volatility expectations through theoretically robust metrics," said Rob Hocking, Senior Vice President and Head of Multi-Asset Solutions and Derivatives Strategy at Cboe Global Markets. "We are pleased to expand our offering with the new Cboe 3-Month Implied Correlation Index, which is designed to help market participants better understand some of the drivers impacting correlation in the equity markets and more effectively hedge underlying risk and construct trading strategies by isolating volatility components."

Dispersion traders may use COR3M as an indicator to time trades and manage risk. Implied correlation provides a measure of the relative cheapness/richness of index options in relation to the underlying index components. A long dispersion trade, which involves selling at-the-money index option straddles and purchasing at-the-money straddles in options on the index components, could be expected to perform profitably under a high correlation regime.

Cboe Hanweck, part of Cboe's Data and Access Solutions, offers an extensive and comprehensive array of data, analytics, and execution solutions helping participants navigate markets in real-time. Cboe Hanweck's options analytics is a real-time data feed that shows implied volatilities and Greeks as well as model-fitted theoretical prices. These are generated using industry-standard pricing models, sophisticated volatility surface models and the highest quality inputs. Hanweck Associates LLC was acquired by Cboe in 2020, forming Cboe Hanweck.

Cboe is initially publishing an Implied Correlation Index for the 3-month tenor and plans to extend its methodology to calculate implied correlation for a full suite of other maturities: the 1-month, 6-month, 9-month, 12-month, 18-month and 24-month tenors. Cboe is offering COR3M index values on its CSMI feed and disseminating index values four times per minute throughout the trading day.

A complete overview of COR3M, including methodology, components and pricing information, can be accessed here. Additional information on the characteristics, benefits and use cases of COR3M are presented in this webinar.

About Cboe Global Markets, Inc.

Cboe Global Markets (Cboe: CBOE), a leading provider of market infrastructure and tradable products, delivers cutting-edge trading, clearing and investment solutions to market participants around the world. The company is committed to operating a trusted, inclusive global marketplace, providing leading products, technology and data solutions that enable participants to define a sustainable financial future. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives and FX, across North America, Europe and Asia Pacific. To learn more, visit www.cboe.com.

CBOE-OE

Cboe®, Cboe Global Markets®,Cboe Volatility Index®, CFE®, and VIX® are registered trademarks and Cboe Futures Exchange^SM, COR3M^SM, and Cboe Hanweck^SMare service marks of Cboe Exchange, Inc. Standard & Poor's®, S&P®, and S&P 500®  are registered trademarks of Standard & Poor's Financial Services, LLC, and have been licensed for use by Cboe Exchange, Inc. All other trademarks and service marks are the property of their respective owners.

Any products that have the S&P Index or Indexes as their underlying interest are not sponsored, endorsed, sold or promoted by Standard & Poor's or Cboe and neither Standard & Poor's nor Cboe make any representations or recommendations concerning the advisability of investing in products that have S&P indexes as their underlying interests. All other trademarks and service marks are the property of their respective owners.

Options involve risk and are not suitable for all market participants. Prior to buying or selling an option, a person should review the  Characteristics and Risks of Standardized Options (ODD), which is required to be provided to all such persons.  Copies of the ODD are available from your broker or from The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606.

Cboe Global Markets, Inc. and its affiliates do not recommend or make any representation as to possible benefits from any securities, futures or investments, or third-party products or services. Cboe Global Markets, Inc. is not affiliated with S&P. Investors should undertake their own due diligence regarding their securities, futures and investment practices. This press release speaks only as of this date. Cboe Global Markets, Inc. disclaims any duty to update the information herein.  Nothing in this announcement should be considered a solicitation to buy or an offer to sell any securities or futures in any jurisdiction where the offer or solicitation would be unlawful under the laws of such jurisdiction. Nothing contained in this communication constitutes tax, legal or investment advice. Investors must consult their tax adviser or legal counsel for advice and information concerning their particular situation.

Cboe Global Markets, Inc.  and  its  affiliates, to the maximum extent permitted by applicable law,  make  no  warranty,  expressed  or  implied,  including,  without  limitation,  any  warranties  as  of  merchantability,  fitness  for  a particular  purpose,  accuracy,  completeness  or  timeliness,  the  results to  be  obtained  by  recipients  of  the  products  and  services  described  herein, or as to the ability of the S&P 500 index to track the performance of its strategy, and shall not in any way be liable for any inaccuracies or errors.  Cboe Global Markets, Inc. and its affiliates have not calculated, composed or determined the constituents or weightings of the securities that comprise the third-party indices referenced in this press release and shall not in any way be liable for any inaccuracies or errors in any of the indices referenced in this press release. 

Cautionary Statements Regarding Forward-Looking Information
Certain  information  contained  in  this  news release  may  constitute  forward-looking  statements.  We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made and are subject to a number of risks and uncertainties.

SOURCE Cboe Global Markets, Inc.

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