VIX Volatility Index Historical Chart

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. For example, on Nov. 9, 2017, the VIX climbed 22% during the trading session on fears of delays in the tax reform plan.

VIX vs. S&P 500 Price

  1. This translates to a willingness to stay invested and potentially even increase exposure to the market, further fueling a rally.
  2. Alternatively, you could adjust your asset allocation to cash in recent gains and set aside funds during a down market.
  3. It’s unusual for the market to show no signs of worry that typically accompanies new highs and economic uncertainty.
  4. This process involves computing various statistical numbers, like mean (average), variance, and finally, the standard deviation on the historical price data sets.

The CBOE Volatility Index (VIX) is a measure of expected price fluctuations in the S&P 500 Index options over the next 30 days. The VIX, often referred to as the “fear index,” is calculated in real time by the Chicago Board Options Exchange (CBOE). Before investing in any VIX exchange-traded products, you should understand some of the issues that can come with them.

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The VIX is considered a reflection of investor sentiment and has in the past been a leading indicator of a dip in the S&P 500, but that relationship may have changed in recent times. For instance, in the three months between Aug. 8, 2017, and Nov. 8, 2017, the VIX was up 19%—seemingly suggesting anxiety among market participants and implying that the S&P 500 should be on a downward trajectory. Downside risk can be adequately hedged by buying put options, the price of which depend on market volatility.

What Is the CBOE Volatility Index (VIX)?

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. Over long periods, index options have tended to price in slightly more uncertainty than the market ultimately realizes. Specifically, the expected volatility implied by SPX option prices tends to trade at a premium relative to subsequent realized volatility in the S&P 500 Index. Market participants have used VIX futures and options to capitalize on this general difference between expected (implied) and realized (actual) volatility, and other types of volatility arbitrage strategies. The VIX, formally known as the Chicago Board Options Exchange (CBOE) Volatility Index, measures how much volatility professional investors think the S&P 500 index will experience over the next 30 days.

How Can I Use the VIX Level to Hedge Downside Risk?

The VIX is an index run by the Chicago Board Options Exchange, now known as Cboe, that measures the stock market’s expectation for volatility over the next 30 days based on option prices for the S&P 500 stock index. Volatility is a statistical measure based on how much an asset’s price moves in either direction and is often used to measure the riskiness of an asset or security. is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement plus500 review of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site.

Examples include the CBOE Short-Term Volatility Index (VIX9D), which reflects the nine-day expected volatility of the S&P 500 Index; the CBOE S&P Month Volatility Index (VIX3M); and the CBOE S&P Month Volatility Index (VIX6M). Products based on other market indexes include the Nasdaq-100 Volatility Index (VXN); the CBOE DJIA Volatility Index (VXD); and the CBOE Russell 2000 Volatility Index (RVX). The VIX has paved the way for using volatility as a tradable asset, albeit through derivative products. CBOE launched the first VIX-based exchange-traded futures contract in March 2004, followed by the launch of VIX options in February 2006. As a rule of thumb, VIX values greater than 30 are generally linked to large volatility resulting from increased uncertainty, risk, and investors’ fear. VIX values below 20 generally correspond to stable, stress-free periods in the markets.

You may have seen references to something called the VIX, an index that measures volatility, during times of extreme financial stress. Understanding it all can be complicated, so let’s take a closer look at what it means. Active traders who employ their own trading strategies and advanced algorithms use VIX values to price the derivatives, which are based on high beta stocks. Beta represents how much a particular stock price can move with respect to the move in a broader market index. For instance, a stock having a beta of +1.5 indicates that it is theoretically 50% more volatile than the market. Traders making bets through options of such high beta stocks utilize the VIX volatility values in appropriate proportion to correctly price their options trades.

As an investor, if you see the VIX rising it could be a sign of volatility ahead. You might consider shifting some of your portfolio to assets thought to be less risky, like bonds or money market funds. Alternatively, you could adjust your asset allocation to cash in recent gains and set aside funds during a down market. The VIX is considered a reflection of investor sentiment, but one must remember that it is supposed to be a leading indicator.

In fact, aside from a brief spike in April, the fear index has been subdued all year. The Cboe Volatility Index (VIX), aka “Fear Index,” is treating investors to a rare moment of calm not experienced since 2019. And as Investors are certainly enjoying this, the stock market is giving them even more to love. It’s the classic Goldilocks situation where the major indexes are hovering near all-time highs, yet volatility has disappeared. It’s unusual for the market to show no signs of worry that typically accompanies new highs and economic uncertainty.

The VIX index tracks the tendency of the S&P 500 to move away from and then revert to the mean. When the stock markets appear relatively calm but the VIX index spikes higher, professionals are betting that prices on the S&P 500—and thereby the stock market as a whole—may be moving higher or lower in the near term. When the VIX moves lower, investors may view this as a sign the index is reverting to the mean, with the period of greater volatility soon to end. 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. Some exchange-traded securities let you speculate on implied volatility up to six months in the future, such as the iPath S&P 500 VIX Mid-Term Futures ETN (VXZ), which invests in VIX futures with four- to seven-month maturities. The most significant words in that description are expected and the next 30 days.

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