The VIX volatility index is an indication of the expected volatility (i.e. range) of the S&P 500 stock index for the next thirty days. The VIX is provided by the Chicago Board Options Exchange (CBOE) in the US, and is calculated using the near term S&P 500 options markets. The symbol for the current version of the VIX volatility index is VIX, with the symbol for the previous version of the S&P 500 volatility index being VXO.
VIX and Implied Volatility
The VIX volatility index indicates the implied volatility (i.e. the expected range) of the S&P 500 stock index for the next thirty days as an annualized percentage of the current S&P 500 stock index price. For example, an S&P 500 stock index price of 1,000 and a VIX of 20 would indicate that the S&P 500 stock index is expected to fluctuate between 1,057 and 943 over the next thirty days.
Trading the VIX
The VIX volatility index is used by options traders to calculate options premiums (i.e. options prices), and also by S&P 500 traders to determine the expected daily range for the S&P 500 stock index and futures market. The VIX is also a tradeable market in its own right, by way of its futures and options markets.
