CBOE Volatility Index ^VIX Charts, Data & News

A VIX of greater than 20% signifies increasing uncertainty and fear in the market and implies a higher-risk environment. During the 2008 Financial Crisis, the volatility index skyrocketed to extreme levels of above 50%. That meant that option traders expected stock prices to fluctuate widely, between a 50% upswing or downswing within the next year, 68% of the time. When investors anticipate large upswings or downswings in stock prices, they often hedge their positions with options.

Key Volatility Products

The CBOE S&P 500 Volatility Index (VIX) is known as the “Fear Index” because it is such a helpful gauge to measure how worried traders are that the S&P 500 might suddenly drop within the next 30 days. Melissa Pistilli has been reporting on the markets and educating investors since 2006. She has covered a wide variety of industries in the investment space including mining, cannabis, tech and pharmaceuticals.

A falling VIX indicates that traders in the options market expect the S&P 500 Index to trade more quietly. A call option is an option contract in which the holder (buyer) has the right (but not the obligation) to buy a specified quantity of a stock at a specified price within a fixed period of time. A volatility index is a measure of a particular market’s likelihood of making sudden, unexpected price movements, or its relative instability.

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Downside risk can be adequately hedged by buying put options, the price of which depends on market volatility. Astute investors tend to buy options when the VIX is relatively low and put premiums are cheap. Volatility is one of the primary factors that affect stock and index options’ prices and premiums.

In other words, VIX ETPs have a tendency to suffer from contango, which is when a futures price is higher than the current price. If held for too long a period, they lose their value, making them an unsuitable permanent hedge against market volatility. If investors are able to get the timing right, VIX futures ETFs can be a hedge against a market crash. However, the opportunities inherent in VIX ETPs don’t negate the fact that they do carry significant risk, and are not for those with a longer-term investment strategy or low risk tolerance. Investors can use the VIX to measure the level of fear in the market and employ this information when making investment decisions.

What is the Cboe Volatility Index (VIX)?

Consulting with an independent, fiduciary financial planner before making moves in the market to ensure they are in line with your long-term goals is advised. While the Financial Modeling For Equity Research VIX is a valuable tool, it’s important to understand its limitations. The result is the VIX value, representing the market’s expectation of 30-day volatility. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.

Stock Market News for May 20, 2025

Understanding how the VIX works and what it’s saying can help short-term traders tweak their portfolios and get a feel for where the market is headed. CFE lists nine standard (monthly) VIX futures contracts, and six weekly expirations in VIX futures. As such, there is a wide variety of potential calendar spreading opportunities depending on expectations for implied volatility. In more practical terms, the VIX uses option prices to estimate how volatile the market will be in the coming month, and then extrapolates that to the next 12 months.

A high VIX indicates high expected volatility and a low VIX number indicates low expected volatility. The more dramatic the price swings in that instrument, the higher the level of volatility. And the probability of S&P 500 trading within this specific range is 66.7% (or one standard deviation). Basically, if the S&P 500 is currently trading at 3,000, VIX is “implying” that over the next 12 months, its price will fluctuate between 2,100 and 3,900 (30% below and above 3,000). For example, a VIX of 30 translates to an implied volatility of 30% on the SPX. The VIX has an inverse relationship with the S&P 500, meaning that spikes in the VIX typically occur when stock prices drop.

The predictive nature of the VIX makes it a measure of implied volatility, not one that is based on historical data or statistical analysis. The time period of the prediction also narrows the outlook to the near term. One of the most popular and accessible of these is the ProShares VIX Short-Term Futures ETF (VIXY), which is based on VIX futures contracts with a 30-day maturity. Large institutional investors hedge their portfolios using S&P 500 options to position themselves as winners whether the market goes up or down, and the VIX index follows these trades to gauge market volatility. It tends to rise during times of market stress, making it an effective hedging tool for active traders. Though it can’t be invested in directly, you can purchase ETFs that track the VIX.

The reality is the VIX has no publicly listed shares and cannot be traded directly in swissquote review the same way as a company’s stock. The current version of the VIX, which has been in popular use since 2003, offers a more comprehensive look at options IV by considering a range of near-the-money call and put strikes on the broader S&P 500. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results.

• Generally, the VIX tends to have an inverse relationship to stock market performance.
• However, the S&P 500 was busy scaling all-time highs during that time frame.
• Commissioned by the CBOE and developed by Professor Robert Whaley, the index initially focused on S&P 100 (OEX) options before evolving into its current form.
• During its origin in 1993, VIX was calculated as a weighted measure of the implied volatility of eight S&P 100 at-the-money put and call options, when the derivatives market had limited activity and was in its growing stages.
• The reverse is true when the market advances—the index values, fear, and volatility decline.

Throughout its existence, the VIX has served as an invaluable witness to major market events. During the 1987 Black Monday crash, estimates suggest the index would have reached approximately 150 had it existed then. More recently, it hit dramatic peaks of 89.53 during the 2008 Financial Crisis and 82.69 amid the 2020 COVID-19 market crash.

• The VIX is typically used to measure short-term investor sentiment, but many also use the index as a foundation for active investing strategies.
• When you purchase options, you’re buying the right (but not the obligation) to buy or sell a stock at a specified date and price.
• Volatility is one of the primary factors that affect stock and index options’ prices and premiums.
• During the 2008 Financial Crisis, the volatility index skyrocketed to extreme levels of above 50%.

Some of the more popular and active of these include the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX), the ProShares Ultra VIX Short-Term Futures ETF (UVXY) and the Short VIX Short-Term Futures ETF (SVXY). But VIX-tracking funds are typically used by day traders and tend to be extraordinarily risky. The VIX can help investors predict short-term performance, but the fluctuations shouldn’t concern long-term investors. Based on the Federal Reserve of St. Louis data, a value of less than 20 could be considered relatively low, meaning that investors don’t tend to expect large future price swings.

The Cboe Volatility Index, or the “VIX,” is a measure of the US stock market’s 30-day expected volatility—or how much and how quickly stock prices are anticipated to change. It’s often called “the fear gauge,” since higher volatility is linked with higher uncertainty among investors. The index was created by the Chicago Board Options Exchange (aka Cboe, pronounced see-boh), which is a trading exchange like the New York Stock Exchange that’s focused on options contracts. The Chicago Board Options Exchange (CBOE) created the VIX (CBOE Volatility Index) to measure the 30-day expected volatility of the US stock market, sometimes called the “fear index”.

How can I trade the VIX?

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