VIX - CBOE Volatility Index

Loading the player...

DEFINITION of 'VIX - CBOE Volatility Index'

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. Out Of The Money - OTM

    A call option with a strike price that is higher than the market ...
  3. At The Money

    A situation where an option's strike price is identical to the ...
  4. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  5. In The Money

    1. For a call option, when the option's strike price is below ...
  6. OEX

    The ticker symbol used to identify index options traded on the ...
Related Articles
  1. Mutual Funds & ETFs

    PHDG: PowerShares S&P 500 Downside Hedged ETF

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  2. 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.
  3. Investing Basics

    Understanding the CBOE Volatility Index

    The VIX shows the market’s volatility expectations for the next 30 days.
  4. Mutual Funds & ETFs

    ETF Analysis: iPath S&P 500 VIX Futures

    Learn more about the iPath S&P 500 Short-Term Futures Exchange Traded Note, the characteristics of VXX and the suitability of the ETN for investors.
  5. Investing Basics

    Asset Allocation: The First Step Toward Profit

    Understanding the different asset classes is an essential part of portfolio diversification.
  6. Forex Education

    The Credit Crisis And The Carry Trade

    When boom times turned to bust, these trades proved devastating for traders and the broader markets.
  7. Options & Futures

    Volatility - The Birth Of A New Asset Class

    Learn more about the trading possibilities with the VIX.
  8. Options & Futures

    Introducing The VIX Options

    Discover a new financial instrument that provides great opportunities for both hedging and speculation.
  9. Options & Futures

    Volatility's Impact On Market Returns

    Find out how to adjust your portfolio when the market fluctuates to increase your potential return.
  10. 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.
RELATED FAQS
  1. What is the relationship between implied volatility and the volatility skew?

    The volatility skew refers to the shape of implied volatilities for options graphed across the range of strike prices for ... Read Full Answer >>
  2. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  3. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  4. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  5. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  6. How does a forward contract differ from a call option? (AAPL)

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  6. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
Trading Center