- New Cboe S&P 500 Dispersion Index (DSPX) expands Cboe’s leading suite of volatility indices
- The first-of-its-kind index designed to measure expected dispersion in the S&P 500 Index
- Aims to provide deeper insights into volatility of S&P 500 Index vs. those of its components
Cboe Global Markets, the world’s leading derivatives and securities exchange network, and S&P Dow Jones Indices (S&P DJI), the world’s leading index provider, announced plans to launch the Cboe S&P 500 Dispersion Index (DSPX) on Wednesday, September 27. Jointly developed by Cboe Labs, the company’s innovation arm, and S&P DJI, this new index is the latest addition to Cboe’s volatility index suite and aims to provide deeper insights into U.S. equity market volatility.
Dispersion can be used by market participants to gain visibility into potential opportunities for portfolio diversification. Specifically, dispersion strategies allow investors to model the impact of company-specific risk on a portfolio by measuring the variability of volatilities for single-name stocks relative to the volatility of the index itself.
In the case of DSPX, this new index may help investors better understand how the S&P 500 Index – one of the largest and most actively traded indices in the world – moves relative to the constituent companies in the index – 500 of the largest public companies listed in the U.S. – over the next 30 calendar days. Similar to the methodology used for the Cboe Volatility Index® (VIX® Index), the calculation for the DSPX Index is derived from prices of S&P 500® Index options (SPX) and the single stock options of the S&P 500 Index’s constituent companies.
“As a leading global exchange operator with unparalleled product innovation expertise, Cboe is uniquely positioned to gain insight into what market participants are looking for and in turn develop solutions to help meet their needs,” said Rob Hocking, Senior Vice President and Head of Product Innovation at Cboe. “Cboe transformed volatility trading with the creation of the VIX Index 30 years ago and we continue to explore new frontiers in the volatility space. We believe the new Cboe S&P 500 Dispersion Index will provide investors with a further view into market volatility, complementing other volatility indices in our product suite. The opportunity to potentially trade exchange-listed futures on this index is expected to also help break down access barriers to allow more investors to utilize dispersion trading strategies.”
“Market benchmarks and their volatilities, including measures such as the VIX Index, have become ubiquitous in describing the prevalent risk regime. However, market volatility expresses only a fraction of the overall opportunity set and risks,” said Tim Edwards, Global Head of Index Investment Strategy at S&P Dow Jones Indices. “By collaborating with Cboe to launch DSPX, market participants will have another tool to further understand opportunities for diversification as well as risks within the world’s most liquid equity benchmark.”
Cboe Labs plans to develop a futures product on the DSPX Index to be listed on Cboe Futures Exchange (CFE), subject to regulatory review, which will potentially enable investors to manage their exposure and express views on SPX dispersion, or transfer risk between SPX options and options based on the underlying S&P 500 Index constituents.
Cboe and S&P DJI will host a webinar on the new DSPX Index and the potential benefits of dispersion trading on Wednesday, October 4. Additional information and registration details can be found online here.
In addition, the new index will be a topic for a panel discussion at Cboe’s Global Risk Management Conference (RMC), taking place from October 17-20, 2023, in Austin, Texas. To learn more about RMC, visit the conference website.
Source: Cboe
