Cboe explores a trade on Wall Street’s fear gauge that never expires

A trading tool made popular by crypto could give investors a way to bet on Wall Street’s fear gauge without an expiry date. Cboe is exploring perpetual futures tied to the VIX, according to CoinDesk, citing Bloomberg. The idea remains at an early stage, with no contract specifications or filing. Its appeal is straightforward: traders would no longer have to keep replacing expiring contracts to maintain their positions.

The VIX measures the volatility, or size of price swings, expected in the S&P 500 over the next 30 days. Its reading comes from options prices. Investors buy options for protection against sharp market falls, and a rush for that protection during downturns can send the index higher. That relationship has earned the VIX its nickname as Wall Street’s “fear gauge,” and made it the basis for a market in futures, options and exchange-traded products.

Taking the expiry date out of the trade

Traditional futures have a deadline. When a contract expires, an investor who wants to keep the same exposure must move into another contract, a process known as rolling. Those repeated switches carry costs that can eat into returns. CoinDesk notes that the same issue drew criticism when bitcoin futures exchange-traded funds debuted in late 2021. For volatility traders, a contract without an expiry could remove that recurring task, though it would not make the position cost-free.

Perpetual futures take a different approach. Rather than expiring, they use funding payments to help keep their trading price aligned with an underlying reference price. Applied to the VIX, that mechanism could theoretically offer investors a closer way to track the current index level. Economist Robert Shiller proposed perpetual futures in 1993, but the crypto industry brought them into commercial use. Cboe’s exploration would extend that crypto-market structure to an established stock-market benchmark.

There are already examples of volatility trading on crypto platforms, although availability does not necessarily mean active trading. Gate offers VIX/USDT perpetual contracts, but CoinDesk describes that market as highly illiquid, with little noticeable volume. Hyperliquid recently listed futures linked to Volmex’s bitcoin implied volatility index, a gauge of expected bitcoin price swings. These products show that the crossover is already happening, even as Cboe’s own plans remain preliminary.

The hedge is the hard part

Removing expiry would solve only part of the problem. Funding payments would still impose costs. More fundamentally, the VIX is a mathematical calculation rather than an asset that can be bought and held. Market makers—the firms that provide buy and sell prices—cannot simply purchase the underlying index to offset their risk. That makes their task different from bitcoin market makers, who can buy or sell actual bitcoin as a hedge.

A potential launch could nevertheless attract more participants to volatility trading. CoinDesk says additional buying and selling, alongside more market-maker hedging across VIX futures and other S&P 500 derivatives, could help bring prices across VIX products into closer alignment. That is a possible outcome, not an established benefit of a product that has yet to be specified.

The next things to watch are whether Cboe advances beyond exploration, sets out contract terms or makes a filing. Those details would give traders a clearer basis for assessing the trade-off: fewer rollovers on one side, and ongoing funding costs and a difficult underlying hedge on the other.