{"id":27012,"date":"2022-02-10T12:43:25","date_gmt":"2022-02-10T20:43:25","guid":{"rendered":"https:\/\/financer.com\/?post_type=indicator&p=27012"},"modified":"2025-02-19T08:30:42","modified_gmt":"2025-02-19T16:30:42","slug":"vix-index","status":"publish","type":"indicator","link":"https:\/\/financer.com\/financial-indicators\/vix-index\/","title":{"rendered":"VIX Index"},"content":{"rendered":"\n

What is the VIX Index?<\/h2>\n\n\n\n

The VIX Index (CBOE Volatility Index) is an index that uses real-time, mid-quote values of S&P 500 Index call and put options to provide a measure of constant, 30-day projected volatility of the U.S. stock market.<\/p>\n\n\n\n

It is one of the most well-known indicators of volatility on a worldwide scale, extensively covered by financial media and constantly monitored by a wide range of market players as a daily market indicator.<\/p>\n\n\n\n

The index was developed by Professor Robert E. Whaley of Duke University, whom the Chicago Board Options Exchange<\/a> (CBOE) commissioned. Providing a quantitative measure of market risk and investors’ sentiment, the index is valuable in trading and investment.<\/p>\n\n\n\n

How to calculate the VIX index?<\/h2>\n\n\n\n

Indices are calculated by summing up the prices of the stocks that comprise them. The index values are calculated using a formula that governs the selection of stocks included in the index. <\/p>\n\n\n\n

The index measures the S&P 500 Index’s predicted 30-day volatility. It is composed of short and long-term puts and calls (with expirations of fewer than 37 days and longer than 23 days) instead of stocks, whose price reflects market expectations of future volatility.<\/p>\n\n\n

\n
\"\"\/
Source: CBOE VIX, White Paper, Cboe Volatility Index\u00ae<\/em><\/figcaption><\/figure><\/div>\n\n\n

The VIX formula is the square root of the par variance swap rate over the first 30 days, commonly known as the risk-neutral expectation. VIX Index values are expressed in percentage points and annualized to cover the next twelve months.<\/p>\n\n\n\n

As with conventional indices, the VIX Index is calculated using rules to select the options that make up the index and a formula to determine the index values.<\/p>\n\n\n\n

For an in-depth understanding of the formula, its components are described in the White Paper<\/a>.<\/p>\n\n\n\n

What is the current VIX Index?<\/h2>\n\n\n\n

The VIX Index is currently at 37.55<\/strong>.<\/a> (as of 10:18 AM EST, January 24, 2022). The ratio was 17.67<\/strong> last month, compared to 33.09<\/strong> a year ago.<\/p>\n\n\n\n

How to interpret VIX Index values?<\/h2>\n\n\n\n

The VIX Index is widely known as the “Fear Index” because it measures the level of fear or stress in the stock market, using the S&P 500 index as a proxy for the entire market. <\/p>\n\n\n\n

As such, the VIX reacts accordingly during times of significant market turmoil. The index rose gradually as the market neared the height of the late 1990s technological bubble, then leveled off during the stable growth period of 2003-2007, soared during the 2008 economic crisis and in the second half of 2011, and rose again when the Covid-19 pandemic stroke markets in 2020.<\/p>\n\n\n\n

The higher the VIX, the greater the level of fear and uncertainty in the market, with levels above 30 indicating extreme uncertainty. In contrast, VIX values below 20 typically correspond to times of market stability.<\/p>\n\n\n\n

VIX index activity falls into two categories when the index spikes or when it swells:<\/p>\n\n\n\n