This week's question:
DATE: September 28, 2015
Why does the VIX move in the opposite direction of the S&P 500?
The S&P 500 Index option market is one of the few markets where put options dominate the trading volume. When the S&P 500 moves lower, the cost of protecting a portfolio rises due to an increase in demand for put options on the S&P 500. This increase in demand for SPX® options results in higher implied volatility on individual SPX options and a rise in VIX®. To learn more about the relationship between VIX and SPX, view this segment of "Ask the Institute."