Volatility Index

The CBOE Volatility Index ("VIX") is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. In other words, VIX uses options pricing as a way to measure perceived market risk and uncertainty. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.

VIX is an up-to-the-minute estimate of expected volatility that is calculated by using real-time S&P 500 Index option bid/ask quotes. VIX uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30 day measure of the expected volatility of the S&P 500 Index.

VIX Futures

These innovative futures provide a pure play on implied volatility independent of the direction and level of stock prices. VIX futures may also provide an effective way to hedge equity returns, to diversify portfolios and to spread implied against realized volatility.

• Depending on how the market perceives volatility, the price of a VIX futures contract can be lower, equal or higher than the VIX spot price.
• VIX futures are standard futures contracts that cash settle to a Special Opening Quotation of VIX.
• There is no cost-of-carry relationship between the price of VIX futures and VIX.
• VIX futures are cash-settled.
• Futures on VIX trade electronically on the CBOE Futures Exchange.

VIX Options

VIX options are a securities product and customers will need to have a securities account in order to trade VIX options. Besides being one of the largest Futures Commission Merchants in the world, Vision is also a securities broker/dealer. We support trading in VIX options as well as other securities products.

The VIX formula isolates expected volatility from other factors affecting option prices, such as changes in underlying price, dividends, interest rates and time to expiration. As such, VIX options offer a way for investors to buy and sell option volatility simply and directly, without having to deal with the other risk factors that would otherwise have an impact on the value of an SPX option position.

• VIX options are 1/10th the size of the futures contracts, but they are both cash-settled to the same value.
• The underlying for VIX options is the expected value of VIX at expiration, rather than the current, or spot VIX value.
• VIX options are European style options and can only be exercised on the expiration date.
• VIX options expire on Wednesday as opposed to stock options which expire on a Friday.

Mini-VIX Futures

Mini-VIX futures are for sophisticated investors who are looking for a smaller scale play on implied volatility that is independent of the direction and level of stock prices. The smaller VIX futures contracts with proportionally lower margins may be more manageable for a wider variety of users.

• Mini-VIX futures are 1/10th the size of CFEs standard CBOE VIX futures contracts.
• The smaller contracts feature a $100 multiplier versus $1,000 for the larger VIX futures contracts.
• Mini-VIX futures have a minimum price movement (tick) of $5 per contract.
• The contracts are cash-settled.