VIX Explained

In my personal opinion and from experience, based on the current geo-political environment I would say the VIX is fairly priced in the 20 point range (+/- 2). However, that mean will change as economic, market, and political conditions change. If we look at historical points of the VIX we see that during the height of the great housing crisis in 2008 and 2009 the VIX rocketed to levels far above 50. For our understanding of the model, the options are pricing that the S&P 500 index (the largest 500 companies) will be in a range of +/- 50% over the year, 68% of the time. The VIX quickly came falling back down and then went too far the other way and fell below 15. Again, during the crisis the VIX would have us believe that all is well and that the S&P 500 index has a very low probability of making any radical moves, again the VIX was wrong and it moved back up.

Some of the current featured titles on the Vix app include Sicario, The Hurt Locker, Weekend At Bernie’s, The Rose of Guadalupe, and The Heroes of the North. All of these are available in Spanish — and even better — are all totally free to watch. What comes after the election might matter even more, one strategist said.

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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. However, the S&P 500 was busy scaling all-time highs during that time frame. 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). As the range of strike prices for puts and calls on the S&P 500 increases, it indicates that the investors placing the options trades are predicting some price movement up or down.

Remember the VIX is not set by any one person or even groups of people; it is solely determined by order flow of all buyers and sellers of options. One could extrapolate an equilibrium level, where the market (risk premium) is fairly priced based on the economic landscape. The VIX is a number derived from the prices of options premium in the S&P 500 index (which is an index comprising 500 large cap stocks). Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy.

  1. Our editorial team does not receive direct compensation from our advertisers.
  2. The VIX is a highly touted index on CNBC and in financial circles, but what is it and what does it represent?
  3. In many cases it is a catalyst event that unleashes the power as one side steps away and forces the other side into full capitulation.
  4. Although the VIX revealed high levels of investor anxiety, the Investopedia Anxiety Index (IAI) remained neutral.
  5. Before investing in any VIX exchange-traded products, you should understand some of the issues that can come with them.

Only SPX options are considered whose expiry period lies within more than 23 days and less than 37 days. Like any year, the stock market fluctuates, but some technical analysts have observed patterns in the election cycle. Mark Newton from Fundstrat has said the months from March to August and then November to year-end will perform the best, as they historically have done in election years. Bank of America technical strategist Stephen Suttmeier, meanwhile, said August is likely to be the strongest month after a lackluster January to May. It is sometimes easier to think of trading VIX options opposite of how you would trade the options in the S&P.

Volatility S&P 500 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. Instead, investors can take a position in VIX through futures or options contracts, or through VIX-based exchange traded products (ETPs). Prices are weighted to gauge whether investors believe the S&P 500 index will be gaining ground or losing value over the near term. The VIX index measures volatility by tracking trading in S&P 500 options. 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.

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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. The Cboe Volatility Index, known as the stock market’s “fear gauge,” began trading October futures earlier this week.

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This formula was developed by Vanderbilt University Professor Robert Whaley in 1993. It should be noted that these are rough guidelines ⏤ unexpected events can throw a wrench into markets and a low VIX level today could be followed by a period of extreme volatility if circumstances change. VIX values are calculated using the CBOE-traded standard SPX options, which expire on the third Friday of each month, and the weekly SPX options, which expire on all other Fridays.

In finance, mean reversion is a key principle that suggests asset prices generally remain close to their long-term averages. If prices gain a great deal very quickly, or fall very far, very rapidly, the principle of mean reversion suggests they should snap back to their long-term average before long. Along with the default Highlights web3 stocks tab, users can also browse channels by Cinema, News, Series, Novels, Sports, Variety, and Kids. The ‘On Demand’ section of the Vix App has similar sections, though you can pick and choose what you watch instead of browsing through different channels. If you’d rather watch news or sports, there are dedicated pages for those, too.

In many cases it is a catalyst event that unleashes the power as one side steps away and forces the other side into full capitulation. The most significant words in that description are expected and the next 30 days. 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. At the time, the index only took into consideration the implied volatility of eight separate S&P 100 put and call options.

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Unlike most streaming services today, the big draw to Vix is that it’s 100 percent free, no subscription or credit card required. Just download the app, open it, and you can start watching instantly. The Vix app currently has around 40,000 hours of available content — all of which is ad-supported.

While anyone can download and start streaming content on Vix in countries where it’s available, those who want English content will have to look elsewhere. Given that Vix is available free of cost and doesn’t even require a subscription, it’s natural for users to wonder if the app is available in other languages. The app offers both subtitles and closed captions for select content, but even those are restricted to Spanish. As a result, users won’t be able to watch Spanish language programming with English subtitles either. Developments in the election are also stirring up other parts of the market, and after Trump’s victory at the Iowa caucuses, a Truth Social-linked SPAC skyrocketed 239%. At these tails of extreme there are huge opportunities, for one must see others’ fear or greed as an opportunity and not be sucked in like the rest of the lemmings.

Those contracts, which include the November 5 election date, are trading at a wide gap to September futures, Bloomberg data finds. 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. The VIX attempts to measure the magnitude of price movements of the S&P 500 (i.e., its volatility).