Stock Symbol for Vix Explained for Investors

The Vix index is often referred to as Wall Street's "fear gauge." It's a stock market indicator that measures the expected volatility of the S&P 500 index over the next 30 days.

Investors can access the Vix index through a stock symbol, specifically VIX, which is listed on the Chicago Board Options Exchange (CBOE).

The VIX, also known as the "Fear Index", is not entirely accurate as it's often presented as an indicator of stock market volatility.

VIX is the ticker symbol for the Cboe Volatility Index, a weighted mix of the prices for a range of S&P 500 index options.

Implied volatility is derived from these prices, and VIX measures how much people are willing to pay to buy or sell the S&P 500.

Higher prices on VIX indicate greater uncertainty in the market.

VIX is centered on "implied" volatility, not the Black-Scholes model, and measures the market's expectations for volatility over the next 30 days.

The ETFs or ETNs available do not represent the spot VIX, but rather collections of futures on the VIX that only roughly approximate the performance of the VIX.

You can't directly trade the VIX, but there are plenty of VIX derivatives and exchange-traded products available for those looking to add volatility exposure to their portfolios.

The Cboe lists options contracts that derive their value from short-term VIX futures, and call options on VIX can be used to hedge equity portfolios in the expectation that VIX and stocks will continue to diverge over time.

VIX calls and puts can also be used to bet on directional moves in the index itself, though traders should be aware of the unique expiry and settlement rules pertaining to VIX options. Many VIX-based products may be suboptimal for casual investors due to structural concerns with the roll of underlying futures contracts, increased risk associated with leveraged and inverse ETPs, and more.

Investors can buy VIX-linked exchange-traded funds (ETFs) or exchange-traded notes (ETNs) that track the price action of the VIX index itself and/or some combination of its futures. These products are available for purchase, but it's essential to understand all of your options and speak with a financial professional before making a decision.

The VIX is often referred to as the "fear gauge" because it's a measure of implied volatility that indicates investor sentiment.

A relatively higher VIX suggests elevated fear among investors, while a relatively lower VIX suggests greater calm among market participants.

The VIX is calculated using the weighted prices of S&P 500 index options trading, which are used to measure future price volatility for the S&P 500 index.

As investor uncertainty increases, the price of the VIX increases correspondingly, making it a useful contemporaneous indicator of investor sentiment.

To give you a better idea, here are the key takeaways about the VIX:

The VIX has no publicly listed shares and cannot be traded directly, but there are plenty of VIX derivatives and exchange-traded products available for those looking to add long or short volatility exposure to their portfolios.

These derivatives include options contracts that derive their value from short-term VIX futures, and call options on VIX can be used to hedge equity portfolios in the expectation that VIX and stocks will continue to diverge over time.

VIX calls and puts can also be used to bet on directional moves in the index itself, though traders should be aware of the unique expiry and settlement rules pertaining to VIX options.

Some of the more popular and active VIX-based products include the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX), the ProShares Ultra VIX Short-Term Futures ETF (UVXY), and the Short VIX Short-Term Futures ETF (SVXY).

These products may be suboptimal for casual investors due to structural concerns with the roll of underlying futures contracts, increased risk associated with leveraged and inverse ETPs, and more.

Understanding VIX Futures & Options

Investors should carefully consider the stated goals, suggested holding periods, and liquidity of these instruments before investing.

The VIX and the SPX are generally expected to maintain an inverse correlation with one another, making it a potentially useful hedge for equity portfolios.

VIX futures and options may provide market participants with flexibility to hedge a portfolio, employ strategies in an effort to generate returns from relative pricing differences, or express a bullish, bearish or neutral outlook for broad market implied volatility.

The VIX Index has had a historically strong inverse relationship with the S&P 500 Index, making it a potentially useful hedge for equity portfolios.

Investors should consider the time frame and characteristics associated with VIX futures and options to determine the utility of such a hedge.

A long exposure to volatility may offset an adverse impact of falling stock prices, but investors should carefully consider the potential risks and rewards.

The VIX Index uses the weighted prices of the S&P 500 index (SPX) options trading to measure future price volatility.

The prices used to calculate the price of the VIX are midpoints of real-time S&P 500 option bid/ask price quotations.

As investor uncertainty increases, the price of the VIX increases correspondingly.

The VIX Index is a fairly straightforward measure of implied volatility on one of the most widely tracked U.S. equity benchmarks.

A relatively higher VIX is said to indicate elevated fear among investors, while a relatively lower VIX suggests greater calm among market participants.

The VIX index is a key indicator of market sentiment, and understanding its relationship with the S&P 500 is crucial for investors. Typically, the performance of the VIX index and the S&P 500 are inversely related to each other.

As the range of strike prices for puts and calls on the S&P 500 increases, it indicates that investors are predicting some price movement up or down. The VIX index is calculated based on the prices of S&P 500 options, and its price can guide your decision making on when to buy or sell securities.

The price of VIX can be broken down into four main categories: $0-15, $15-25, $25-30, and $30 and over. These categories indicate increasing levels of market turbulence and volatility.

Here's a simple guide to translating VIX Index levels into potentially more meaningful predictions or measures of market sentiment:

Understanding these categories can help you make more informed investment decisions. For example, if the VIX index is above $30, it may be a good time to consider hedging your portfolio or reducing your exposure to the market.

The ProShares Short VIX Short-Term Futures ETF (SVXY) is an inverse ETF that seeks daily investment results equal to one-half the inverse of the daily performance of the S&P 500 VIX Short-Term Futures Index.

This ETF has a slightly higher expense ratio of 0.95% and more than $389.4 million in assets under management (AUM) as of September 16, 2024.

SVXY is only intended for short-term trading and is not a buy-and-hold strategy. Investors in SVXY should monitor and manage their investments daily to avoid significant losses.

The fund seeks its inverse return from its underlying benchmark for a single day, as measured from one net asset value (NAV) calculation to the next. Inverse ETFs held for more than a day can lead to significant losses.

Here are the performance returns of the SVXY based on available time periods as of September 16th, 2024:

Because inverse ETFs can rack up significant losses quickly, they are designed for knowledgeable investors who carefully assess and manage their risks.