The Volatility Index: What it is and is not
INSIGHT ARTICLE |
The Volatility Index (VIX) measures the option market’s projected volatility. Typically, it spikes during stock market distress and is therefore referred to as the fear gauge. The VIX is often misinterpreted. In this white paper, learn if the VIX helps investors’ time-the-market or offers any practical portfolio applications.
The VIX, created by the Chicago Board of Options Exchange (CBOE) in 1993, measures implied volatility for the S&P 100 index with the data beginning in 1990. In 2003, the CBOE changed the underlying index to the S&P 500. As a forward-looking measure of volatility, the VIX uses option prices to estimate what volatility is expected over the next 30 days for the S&P 500 (which is often referred to as implied volatility). It is different than realized volatility that calculates historical volatility of the underlying index from the past 30 days.
Information in this document was prepared by DiMeo Schneider & Associates, L.L.C. and although information in this document has been obtained from sources believed to be reliable, RSM US Wealth Management LLC, DiMeo Schneider & Associates, L.L.C. and their respective affiliates do not guarantee its accuracy, completeness or reliability and are not responsible or liable for any direct, indirect or consequential losses from its use. Any such information may be incomplete or condensed and is subject to change without notice. The Frontier EngineerTM is a registered trademark of DiMeo Schneider & Associates, L.L.C.