CBOE Volatility Index

CBOE Volatility Index

See VIX Index.

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CBOE Volatility Index

A mathematical measure of the implied volatility of options trading on the S&P 500 index. That is, the CBOE Volatility Index attempts to measure the likelihood of option prices to vary unpredictably in the context of a particular pricing model in this case, the Black-Scholes model. A higher number on the index represents greater volatility, while a lower number represents lower volatility. While critics maintain that its usefulness is overstated, the index is considered a leading indicator of option volatility in the wider market. The CBOE Index is operated by the Chicago Board of Options Exchange, and is also known as the VIX.

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VIX (CBOE Volatility Index)

What Does VIX (CBOE Volatility Index) Mean?

VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which numerically expresses the market's expectation of 30-day volatility; it is constructed by using the implied volatilities of a wide range of S&P 500 Index options. The results are meant to be forward-looking and are calculated by using both call and put options The VIX is a widely used measure of market risk and often is referred to as the investor fear gauge. There are three variations of the volatility indexes: (1) the VIX, which tracks the S&P 500, (2) the VXN, which tracks the Nasdaq 100, and (3) the VXD, which tracks the Dow Jones Industrial Average.

Investopedia explains VIX (CBOE Volatility Index)

The first VIX Index was introduced by the CBOE in 1993 and was a weighted measure of the implied volatility of eight S&P 100 at-themoney put and call options. In 2003, it was expanded to use options that were based on a broader index, the S&P 500 Index, which provides a more accurate picture of investors' expectations of future market volatility. VIX values that are greater than 30 generally are associated with a large amount of volatility as well as greater investor fear and uncertainty. VIX values below 20 generally signal less volatile times for the market.

Related Terms:
• Beta
• In the Money
• Moving Average
• Standard Deviation
• Volatility