For many U.S. investors, VIX is a quite familiar term, and many of them can even make profits by trading VIX. But for those who are new to VIX and want to know more about it, this article is for you. So what exactly is VIX? What does it mean and what role does it play? How do ordinary investors make profits through VIX? Here’s a brief intro.
VIX is a well-known U.S. stock volatility index. Its full name is Volatility Index (the letter V is the initials of volatility in English), also known as “fear index, or investor fear gauge”. The index is compiled and published by CBOE (Chicago Options Exchange).
VIX represents market expectations for volatility over the next 30 days. When the VIX index rises (and exceeds 30), it shows that the market is in decline and the market is full of pessimism. When the VIX index declines (and is below 20), investors are optimistic about the future market and are bullish. The value of VIX is calculated by a specific algorithm based on the options associated with the S&P 500 index, which is not detailed here because of its relative complexity.
There are three main ways to invest VIX, which include: ETF (ETN), options and futures. The relatively simple and viable method for individual investors is through buying and selling ETF/ETN. Some of the most traded ETFs/ETNs are: VXX, VXZ, etc.
Reference Links:
Https://www.investopedia.com/terms/v/vix.asp