The Volatility Index (VIX) Explained

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.

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Investopedia explains ‘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.

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This Post Has 3 Comments

  1. Joule

    so how to use the VIX to trade?

  2. Elder Shield

    Thank you for sharing, really appreciate it:)

  3. Marubozu

    We use VIX to gauge the FEAR level in the market so that we have some opinion what will be the potential market trend. Traders always monitor this VIX very closely when they plan their trade.

    You can also trade VIX using option or ETF. VIX ETF check below link:


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