Trading the VIX (CBOE)

VIX IndexThe VIX or else the "S&P500 Fear Index” is a market thermometer measuring the risk appetite of equity investors. The VIX is a contrarian indicator that can help identify extreme market movements and potential reversals.

Introduction to the VIX Index

The Volatility Index or else the VIX Index of the Chicago Board of Exchange (CBOE) indicates the expected volatility of the S&P 500 Index Options. In other words, it predicts the future volatility of the S&P 500 stock index. The Chicago Board of Exchange introduced the VIX Index in 1993 but added a VIX futures contract, not before 2004.

The VIX index measures the level of fear or greed in the stock market. In general, investors trade the VIX for hedging and speculation:

  • Hedging against the volatility risk of their existing S&P 500 positions, as historically, the VIX Index is negatively correlated to equity prices

  • Speculation on potential VIX volatility movements