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Volatility Trading
Trade volatility with precision: while the VIX Index itself isn’t directly tradable, a range of futures and options products based on it allow you to engage with market volatility just like any other asset class.
Mini VIX futures are complicated financial products that are suitable only for sophisticated market participants. Before trading Mini-VIX futures it is important to understand the complexity and associated risks, which are fully described at www.cboe.com/tradable-products/vix/mini-vix. Please read carefully before investing.
Cboe Global Markets revolutionized investing with the creation of the Cboe Volatility Index® (VIX® Index), the first benchmark index to measure the market's expectation of future volatility. The VIX Index is based on S&P 500® Index options, considered the leading indicator of the broad U.S. stock market. The VIX Index is recognized as the world's premier gauge of U.S. equity market volatility.
The VIX Index estimates expected volatility by aggregating the weighted prices of S&P 500 Index (SPXSM) puts and calls over a wide range of strike prices. Specifically, the prices used to calculate VIX Index values are midpoints of real-time SPX option bid/ask price quotations.
Use this tool to see the market's expected range of the S&P 500 over the next 30 days. This tool allows you to see the S&P 500 Index range in three different ways:
S&P 500 MIN
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S&P 500 MAX
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Expected range of the S&P 500 over the next 30 days
*Represents an all-time closing high. ** Represents an all-time intraday high. The VIX Interactive Calculator is an educational tool intended to assist individuals in learning how the levels of the Vix Index and S&P 500 Index will change based upon user inputs. It is not intended to provide investment advice, and users of the VIX Interactive Calculator should not make investment decisions based upon values generated by it. Your use of the VIX Interactive Calculator is subject to the Terms and Conditions of Cboe's Websites
Like all indices, the VIX Index is a measurement tool. It's a calculation that's designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market.
The VIX Index is expressed as an expected annualized standard deviation. As such, the VIX Index is a non-directional (up or down) forecast based on the implied prices of one-month SPX option strips. This information can be used to inform one's understanding of the magnitude of potential market movements and possibly the impact of such moves on one's portfolio.
Like other forecasts, these estimates can change quickly, which presents both opportunity and risk. The VIX represents the S&P 500 index +/- percentage move, annualized for one standard deviation. For example, if the VIX Index is currently at 16 that means based on the option premiums in the S&P 500 Index, the S&P is expected to stay with in a +/- 16% range over 1 year, 68% of the time (which represents one standard deviation).
The VIX Index has unique characteristics and behaves differently than other financial-based commodity or equity indices. Understanding these traits and their implications is important and may allow for unique investing strategies and opportunities.
Generally, the VIX Index tends to have an inverse relationship with the S&P 500 Index. Expected volatility typically increases when markets are turbulent. In contrast, if stock prices are rising, the VIX Index generally tends to fall or remain steady. But as you can see, this may not always hold true.
Takeaway: The inverse correlation of the VIX Index makes tradeable VIX futures and options contracts potentially attractive tools to manage or hedge risk.
As a volatility indicator, the VIX Index generally tends to be mean reverting. Unlike equity indices that can rise indefinitely, the VIX Index, over time, will generally return or move back to its historical average. Volatility cannot move higher in perpetuity. It also cannot move to zero, which is distinct from equity prices.
Takeaway: VIX options and futures should not be used as long-term, buy-and-hold investments.
Generally speaking, the VIX Index has been significantly more volatile than the S&P 500 Index. Since its inception in 1990, the VIX Index has had a standard deviation of approximately 6.9%, which is 5 times higher than the S&P 500 Index over the same time period.
Takeaway: The VIX Index is generally expected to have bigger and more rapid swings than the S&P 500 Index. Depending on your trading strategy, this may be a benefit or a risk.
At 1/10th the size of the standard VIX futures contract, Mini VIX futures allow market participants to trade or hedge equity market volatility or execute volatility strategies with a more manageably sized contract.
Learn MoreBefore you trade Mini VIX futures, it's important to understand the following:
Stay current with timely market overviews, expert commentary, and best‑in‑class techniques for navigating Volatility Trading.
Following this weekend’s strikes by the US, oil markets remain fairly stable as investors wait for Iran’s response. WTI 1M implied volatility surged to as high as 68% last week before ending the week at 51%. The WTI 1M implied-realized vol spread has halved from a high of 30 pts to 14 currently, as fears of significant oil supply disruption have abated somewhat. Notably, US inflation expectations have barely budged on this latest jump in oil prices, in sharp contrast to the 2022 Russia/Ukraine invasion.
Henry Shwartz, Vice President, Client Engagement, provides insight into recent options market activity.