VIX - CBOE Volatility Index

Loading the player...

What is the 'VIX - CBOE Volatility Index'

The VIX (CBOE volatility index) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge."

There are three variations of volatility indexes: the VIX tracks the S&P 500, the VXN tracks the Nasdaq 100 and the VXD tracks the Dow Jones Industrial Average.

BREAKING DOWN 'VIX - CBOE Volatility Index'

The first VIX, introduced by the CBOE in 1993, was a weighted measure of the implied volatility of eight S&P 100 at-the-money put and call options. Ten years later, it expanded to use options based on a broader index, the S&P 500, which allows for a more accurate view of investors' expectations on future market volatility. VIX values greater than 30 are generally associated with a large amount of volatility as a result of investor fear or uncertainty, while values below 20 generally correspond to less stressful, even complacent, times in the markets.

RELATED TERMS
  1. CBOE Nasdaq Volatility Index - ...

    A measure of market expectations of 30-day volatility for the ...
  2. Implied Volatility - IV

    The estimated volatility of a security's price.
  3. Volatility Arbitrage

    Trading strategies that attempt to exploit differences between ...
  4. S&P/ASX 200 VIX (A-VIX)

    A real-time index that reflects investor expectations about volatility ...
  5. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  6. Volatility Smile

    A u-shaped pattern that develops when an option’s implied volatility ...
Related Articles
  1. Investing Basics

    Understanding the CBOE Volatility Index

    The VIX shows the market’s volatility expectations for the next 30 days.
  2. Options & Futures

    Determining Market Direction With VIX

    The CBOE's volatility index is a helpful market indicator. Learn how it can gauge the mood of the stock market.
  3. Stock Analysis

    Intro to Trading Volatility with Options

    VIX options directly isolate volatility, trade in a range, have high volatility of their own, and cannot go to zero, making them very worthwhile trading vehicles, writes Chris McKhann of Investopedia. ...
  4. Options & Futures

    Option Volatility: Contrarian Indicator

    By John Summa, CTA, PhD, Founder of OptionsNerd.comLike with other measures of market sentiment, implied volatility (IV) can be used to gauge how extreme investor moods have become and to better ...
  5. Options & Futures

    The Volatility Index: Reading Market Sentiment

    Using the Volatility Index can be essential for investing success.
  6. Mutual Funds & ETFs

    Top ETFs and What They Track: Volatility ETFs

    Investopedia explains: Sometimes referred to as the "fear index," the Chicago Board Options Exchange Market Volatility Index (VIX) was created in 1993 as a means to track stock market ...
  7. Technical Indicators

    Using Moving Averages To Trade The Volatility Index (VIX)

    VIX moving averages smooth out the natural choppiness of the indicator, letting traders and market timers access reliable sentiment and volatility data.
  8. Investing

    3 Reasons to Ignore Market Volatility (VIX)

    If you can keep your head while those about you are losing theirs, you can make a nice return in roiling markets.
  9. Mutual Funds & ETFs

    Top 3 Inverse Volatility ETFs (XIV, SVXY)

    Learn about four inverse volatility ETNs and ETFs, and understand how the CBOE VIX indicator is calculated and used to hedge a portfolio.
  10. Stock Analysis

    How ETF Traders Can Use The VIX Index

    Investors and traders alike have surely run across the Volatility Index, commonly referred to as the VIX, in headlines from time to time. Many are quick to overlook this valuable indicator since ...
RELATED FAQS
  1. What is the CBOE Volatility Index? (VIX)

    Find out why investors and analysts use the Chicago Board Options Exchange Volatility Index, or VIX, to measure the market's ... Read Answer >>
  2. What is the relationship between implied volatility and the volatility skew?

    Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ... Read Answer >>
  3. How does implied volatility impact the pricing of options?

    Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options. Read Answer >>
  4. What are the most effective hedging strategies to reduce market risk?

    Learn about different hedging strategies to reduce portfolio volatility and risk, including diversification, index options ... Read Answer >>
  5. Which market indicators reflect volatility in the stock market?

    Learn the most commonly used technical indicators of stock market volatility that are watched by stock market traders and ... Read Answer >>
  6. Can delta be used to calculate price volatility of an option?

    Learn how implied volatility is an output of the Black-Scholes option pricing formula, and learn about that option formula's ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center