This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Market professionals rely on a wide variety of data sources and tools to stay on top of the market. The VIX is one the main indicators for understanding when the market is possibly headed for a big move up or down or when it may be ready to quiet down after a period of volatility.

1. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor.
2. Certain VIX-based ETNs and ETFs have less liquidity than you’d expect from more familiar exchange traded securities.
3. The network’s members have obtained, from Cboe and S&P DJI, the rights to use the VIX methodology to calculate their own volatility indices.
4. As an investor, if you see the VIX rising it could be a sign of volatility ahead.
5. Some exchange-traded securities let you speculate on implied volatility up to six months in the future, such as the iPath S&P 500 VIX Mid-Term Futures ETN (VXZ), which invests in VIX futures with four- to seven-month maturities.

As such, there is a wide variety of potential calendar spreading opportunities depending on expectations for implied volatility. The Cboe Volatility Index, better known as VIX, projects the probable range of movement in the U.S. equity markets, above and below their current level, in the immediate future. Specifically, VIX measures the implied volatility of the S&P 500® (SPX) for the oanda review next 30 days. When implied volatility is high, the VIX level is high and the range of likely values is broad. Such VIX-linked instruments allow pure volatility exposure and have created a new asset class. The CBOE Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index (SPX).

What Is VIX and What Does it Measure?

Since the possibility of such price moves happening within the given time frame is represented by the volatility factor, various option pricing methods (like the Black-Scholes model) include volatility as an integral input parameter. Since fbs broker review option prices are available in the open market, they can be used to derive the volatility of the underlying security. Such volatility, as implied by or inferred from market prices, is called forward-looking implied volatility (IV).

CBOE Volatility Index (VIX): What Does It Measure in Investing?

The CBOE Volatility Index—also known as the VIX—is a primary gauge of stock market volatility. The VIX volatility index offers insight into how financial professionals are feeling about near-term market conditions. Understanding how the VIX works and what it’s saying can help short-term traders tweak their portfolios and get a feel for where the market is headed. Just keep in mind that with investing, there’s no way to predict future stock market performance or time the market.

VIX® Futures & Options Strategies

Miranda is completing her MBA and lives in Idaho, where she enjoys spending interactive brokers legit time with her son playing board games, travel and the outdoors.

Can I buy VIX?

Typically, the performance of the VIX index and the S&P 500 are inversely related to each other. In other words, when the price of VIX is going up, the price of the S&P 500 is usually heading south. The formula used by Cboe to calculate the price of VIX is rather complex, and the price of VIX is updated live during trading hours every 15 seconds. To spare you the math headache involved with calculating the price, let’s look instead at the data used to calculate it. The VIX index is specifically measuring expected volatility for another index, the S&P 500.