What is the underlying for VIX?

VIX Options trade with the S&P 500 Volatility Index as their underlying.

What does VIX index indicate?

VIX is a measure of volatility in the market, which is why it is called the volatility index. In common parlance it is called the Fear Index since a higher level of VIX represents a high level of fear in the market and a low level of VIX indicates a high level of confidence in the markets.

How do you read the VIX index?

In general, a VIX reading below 20 suggests a perceived low-risk environment, while a reading above 20 is indicative of a period of higher volatility. The VIX is sometimes referred to as a “fear index,” since it spikes during market turmoil or periods of extreme uncertainty.

What is a normal VIX value?

VIX of 13-19: This range is considered to be normal and volatility over the next 30 days when the VIX is at this level would be expected to be normal. VIX of 20 or higher: When the VIX gets to be above 20, you can expect volatility to be higher than normal over the next 30 days.

What happens when VIX is high?

“If the VIX is high, it’s time to buy” tells us that market participants are too bearish and implied volatility has reached capacity. This means the market will likely turn bullish and implied volatility will likely move back toward the mean.

What is a high VIX reading?

One such example takes a VIX level below 12 to be “low,” a level above 20 to be “high,” and a level in between to be “normal.” Exhibit 2 illustrates the historical distribution of S&P 500 price changes over 30-day periods after a low VIX, after a high VIX, and after a normal VIX.

What does a VIX of 15 mean?

Example, if the VIX is currently at 15. That means, based on the option premiums in the S&P 500 index, the S&P is expected to stay with in a +/- 15% range over 1 year, 68% of the time (which represents one standard deviation).

Is the VIX a leading indicator?

The VIX is a forward-looking index. It is a leading indicator of the potential risk inherent in the S&P 500, and by proxy in the stock market. It is also a leading indicator of the level of fear that investors and traders have toward the market in the near term.

What is a normal VIX level?

content regarding future volatility. One such example takes a VIX level below 12 to be “low,” a level above 20 to be “high,” and a level in between to be “normal.” Exhibit 2 illustrates the historical distribution of S&P 500 price changes over 30-day periods after a low VIX, after a high VIX, and after a normal VIX.