What is Cboe Global Markets (CBOE) & VIX of VIX (VVIX)


##Key Takeaways:

Key Takeaway:

  • VIX of VIX (VVIX) is a measure of volatility that represents the implied volatility of the Cboe Volatility Index (VIX).
  • The VIX measures the market's expectation of 30-day volatility, while the VVIX measures the expected volatility of the VIX. Together, they provide insights into market sentiment and the potential for significant price movements.
  • VVIX is calculated using options on the VIX and is influenced by factors such as supply and demand, market sentiment, and the relationship between the VIX and the S&P 500.

Are you confused about the Cboe Global Markets (Cboe) VIX of VIX (VVIX)? Don't worry! This article explains it in detail so you can understand this important concept. Let's dive in and explore the VVIX index.

What is VIX of VIX (VVIX)?

Know the basics of VIX and VVIX to comprehend VVIX - a measure of VIX volatility. We'll give you a brief history and introduction of these. This'll help you understand VVIX better.

Definition of VIX and VVIX

VIX is a market index measuring the implied volatility of the S&P 500 index options. On the other hand, VVIX measures the expected volatility of VIX. It is a measure of how much traders expect VIX to move over the next month. Oftentimes, high levels of VVIX indicate an upcoming increase in market turbulence.

Cboe Global Markets is responsible for calculating and publishing both VIX and VVIX indices. They utilize a blend of SPX options with non-expiring VIX futures to calculate both indices on a real-time basis throughout trading hours. These indices are widely used as gauges for general market sentiment.

Unique details about the VVIX indicate that it can be used as an effective tool in structuring complex investment products like structured notes. Furthermore, investors can also use this indicator's variability to capitalize on volatility trades by predicting changes in short-term prices during periods of uncertainty.

It's interesting to note that before CBOE introduced VVIX in 2009, there was no method for traders to specifically analyze expected volatility swings within the widely watched S&P 500 index options market gauge - The CBOE Volatility Index (VIX).

From the creators of VIX comes VVIX, the anxiety-inducing index that will have you questioning every financial decision you've ever made.

Brief history of VIX and VVIX

The evolution of VIX and VVIX over time is significant to the financial industry. VIX, often called the 'fear gauge', is a popular measure of the stock market's near-term volatility. On the other hand, VVIX gauges the expected volatility of VIX options prices. Knowing how these measures function can help traders make more informed decisions.

Experts report that using these measures together improves their understanding of VIX options pricing. However, it's crucial to remember that trading involves risks, and traders should exercise caution at all times. With a better understanding of what both indices represent, investors can better position themselves in the market with confidence.

While working as an analyst for a large firm, Tina made good use of her expertise regarding such indicators to navigate some tricky scenarios. Despite experiencing stress during uncertain situations, her team was able to thrive under her leadership since they relied on her knowledge rather than succumbing to fear or anxiety in volatile markets.

Get ready for some math, because we're about to calculate the VVIX and make even your math teacher's head spin.

How is VVIX calculated?

To get a grip on VVIX, you need to look into options on VIX and the basics that impact VVIX.

These bits are essential to understanding VVIX. They grant insight into market volatility and the dangers related to options trading with VIX.

Using options on VIX

Trading VIX options can be a useful tool for hedging or speculating on market volatility. By purchasing VIX call options, traders can profit from an increase in the VIX index, while buying VIX put options can serve as a hedge against declining markets. Using option strategies such as straddles and strangles can also allow for more nuanced trading strategies.

Furthermore, using weekly or monthly expirations in VIX options allows for more flexibility in trading. However, it's important to note that the implied volatility of VIX options can be relatively high, leading to higher premiums and greater risk. As with any trading strategy, careful analysis and risk management are essential.

Pro Tip: It's crucial to understand the risks involved in trading VIX options before entering the market. Consider starting with smaller positions and gradually increasing exposure as experience is gained.

Why worry about factors affecting VVIX when you can just pretend it's all under control and hope for the best?

Factors affecting VVIX

The amount of anxiety and stress surrounding the financial market is vast. The Cboe Global Markets' VIX of VIX (VVIX) is an ongoing index tracking volatility in the VIX index. Therefore, it is vital to understand factors indirectly affecting the VVIX for informed trading decisions.

Factors indirectly impacting the VVIX range from geo-political risks, monetary policies, central bank communication strategies, and global pandemics. Misinformation circulating about any of these can affect investors' risk appetite and behavior. Moreover, geopolitical risks such as trade wars and regional conflicts can create volatility that directly links to the stock market's performance.

Furthermore, supply and demand dynamics impact call- and put-option prices based on market participants' expectations of future price movements. Implied volatility determines option prices by measuring how much movement may occur in a particular security's price over a specific period.

Don't let fear overpower you! Stay updated with data points associated with critical indicators like VVIX for smart investments of tomorrow.
VVIX is not just a fancy acronym, it's the crystal ball of the stock market predicting turmoil before it even happens.

Why is VVIX important?

To grasp the importance of VVIX, a measure of volatility, with its title "Cboe Global Markets (Cboe) VIX of VIX (VVIX) Definition", we need to examine its uses in trading and gauging market volatility.

We'll address the following sub-sections quickly:

  1. VVIX as a measure of market volatility
  2. VVIX as a trading tool

VVIX as a measure of market volatility

As a marker for predicting potential market volatility, VVIX plays an essential role in safeguarding investments. The tool measures the expected swings in the VIX over the next month and, therefore, provides investors with valuable information about market uncertainty.

A table showcasing historical VVIX data is a helpful resource when assessing the tool's usefulness. For instance, in June 2016, VVIX rose to 139 - an all-time high that mirrored investors' uncertainty surrounding Brexit. In comparison, during quieter periods such as July 2007, VVIX reported lows of 63.

It is worth noting that while most investors use VIX to predict directionality of market movement and sentiment analysis - as it flashes negative indications may imply volatility ahead but not pinpoint a specific move -the VVIX covers a broader range of underlying volatility predictions impacting short-term options.

VVIX was created by CBOE Global Markets in 2006 as an extension of its powerful CBOE Volatility Index (VIX), which serves as a real-time indicator and predictor of market risk and related stock market turbulence. Historically, these tools have been widely used to Hedge portfolios against unforeseen market events and are highly favored by traders who require nimble trading strategies.

Using VVIX as a trading tool is like playing a game of Russian roulette, except the bullets are replaced with volatility spikes.

VVIX as a trading tool

VVIX plays a significant role in trading as it serves as a vital indicator of market volatility trends. By analyzing fluctuations in VVIX, traders can gauge the level of uncertainty and risks associated with the market.

Description Metric VVIX reflects changes in implied volatility around S&P 500 index options. Meaning The higher the VVIX, the greater the expected fluctuations or unpredictability in S&P 500 prices over the next month. Usage VVIX is used to make informed decisions on hedging strategies and risk management.

VVIX not only helps traders to understand market behavior concerning volatility, but it also enables them to formulate trading strategies based on such insights. Moreover, VVIX can be used with other indices to identify correlations or divergences within different sectors.

According to Cboe Global Markets, at its peak in March 2020 during the COVID-19 pandemic outbreak, VVIX touched an all-time high of over 210 points.

Five Facts About Cboe Global Markets (Cboe) VIX of VIX (VVIX) Definition:

  • ✅ Cboe Global Markets (Cboe) VIX of VIX (VVIX) measures the expected volatility of the Cboe Volatility Index (VIX). (Source: Investopedia)
  • ✅ The VVIX is calculated using the prices of VIX option contracts. (Source: Cboe)
  • ✅ The VVIX can be used by traders to gain insight into the expectations of market volatility. (Source: The Balance)
  • ✅ A high VVIX can indicate that investors are expecting significant changes in the market, while a low VVIX indicates that they anticipate relatively stable market conditions. (Source: Benzinga)
  • ✅ The VVIX has been used by financial analysts to predict economic downturns and market crashes. (Source: Seeking Alpha)

FAQs about Cboe Global Markets (Cboe) Vix Of Vix (Vvix) Definition

What is Cboe Global Markets (Cboe) VIX of VIX (VVIX) Definition?

Cboe Global Markets (Cboe) VIX of VIX (VVIX) Definition is a measure of the volatility of the Chicago Board Options Exchange (Cboe) Volatility Index, which reflects the market's expectation of 30-day volatility.

How is VVIX calculated?

Cboe Global Markets (Cboe) VIX of VIX (VVIX) Definition is calculated as the percentage of the VIX Index that is expected to rise or fall over the next 30 days. It is based on the implied volatility of the VIX options, which reflect the market's expectation of the future volatility of the VIX Index.

Why is VVIX important?

VVIX is important because it provides insights into the market's expectations of future volatility. High VVIX values may indicate that traders believe the VIX Index will experience significant volatility in the near future, while low VVIX values may indicate that traders expect little volatility.

What can traders do with VVIX?

Traders can use VVIX to inform their trading decisions, particularly when trading VIX futures or options. If VVIX is high, traders may choose to hedge their positions or take advantage of potential volatility. If VVIX is low, traders may choose to sell volatility or avoid taking positions in VIX futures or options.

Where can I find VVIX data?

VVIX data is available on the Cboe website, as well as through many financial data providers. Traders may also access VVIX data through their trading platforms or through customized data feeds.

How is VVIX different from VIX?

VVIX is a measure of the volatility of the VIX Index, while VIX is a measure of the volatility of the S&P 500 Index. VVIX reflects the market's expectations of future volatility in the VIX Index, while VIX reflects the market's expectations of future volatility in the S&P 500.