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VIX Options and Futures

VIX - CBOE Volatility Index  
SPX 1842.98 12.37
VIX 15.61 -0.50
VIX/J4 15.60 0.00
VIX/K4 16.30 -0.15
VIX/M4 16.55 -0.10
Delayed Quotes
Prices for 3 VIX
Futures are above

Introduction to VIX Options

On February 24, 2006, options on the CBOE Volatility Index® (VIX®) began trading on the Chicago Board Options Exchange. The VIX options contract is the first product on market volatility to be listed on an SEC-regulated securities exchange. This new product, which can be traded from an options-approved securities account, follows the introduction of VIX Futures on the CBOE Futures Exchange (CFE). Many investors consider the VIX Index to be the world's premier barometer of investor sentiment and market volatility, and VIX options are very powerful risk management tools.

Unique Features of VIX Options

VIX options have several features that distinguish them from most equity and index options, including:

Pricing Based on Forward VIX Value
Pricing Can Be Different for a Number of Reasons
Wednesday Settlement
Special Opening Quotation Price
Negative Correlation to Stock Indexes
High Volatility of Volatility

Key Links

VIX Options Strategy - Reverse Collar
VIX Options "Most Innovative" Award
VIX Options FAQ
VIX Options Specifications
VIX Options Video on CBOETV Channel 3
VIX Options Historical Volume Data
VIX Put/Call Ratios
VIX Options Daily Market Data
VIX Options Delayed Option Chain
VIX Historical Price Data
VIX Futures Price and Volume Data
VIX Price Charts
VIX White Paper
VIX Futures Primer
VIX Bibliography
VIX "Most Innovative" Award
Index Options Strategies
CBOE Webcasts

What is VIX?

Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility. The VIX Index is an implied volatility index that measures the market's expectation of 30-day S&P 500® volatility implicit in the prices of near-term S&P 500 options. VIX is quoted in percentage points, just like the standard deviation of a rate of return. The VIX closing price in 2005 was 12.07. Please see the VIX White Paper for more details.

Unique Pricing and Settlement

The pricing and settlement for VIX options will have some differences from the pricing and settlement for equity and stock index options; please see the contract specifications, VIX White Paper, and the information below for more details.

VIX Prices

Exhibit 1 - Prices for S&P 500 and VIX


See also:
VIX Historical Price Data
VIX Price Charts
Options Price Quotes

High Volatility of Volatility

The historic volatilities of the VIX Index and the near-term VIX futures prices generally have been quite a bit higher than those of the S&P 500 Index and most stocks in the index.

Exhibit 2 - Historic Volatilities Based on Daily Returns in 2005

* refers to the price of the near-term VIX futures

Negative Correlation

As is shown in the three Exhibits below, the price of VIX often moves in the opposite direction of the S&P 500 (e.g, when stock prices drop, implied volatility often rises). Investors might explore whether VIX options could be a "catastrophe hedging" tool for stock portfolios.

Exhibit 3 - Correlation of Daily Returns - S&P 500 and VIX

Exhibit 4 - Avg. Price Change on the 26 Days That The S&P 500 Fell by 3% or More (1990 - 2005)

Exhibit 5 - Avg. Price Change on the 33 Days on Which the S&P 500 Rose by 3% or More (1990 - 2005)

Sample Options Strategies

Investors who are -
Bullish on VIX, and Bearish on stocks** -
Might consider -

  • Long VIX Call Options
  • Long VIX Call Spreads
  • Short VIX Put Credit Spreads
  • Long VIX Futures

Investors who are -
Bearish on VIX, and Bullish on stocks** -
Might consider -

  • Long VIX Put Options
  • Long VIX Put Spreads
  • Short VIX Call Credit Spreads
  • Short VIX Futures
** Caution - sometimes VIX and stock prices move in the same direction. Please visit these links for more information about: prices and strategies.

Exhibit 6 - Profit-and-Loss Diagrams
* In the Protective Put and Buy-write diagrams, the faint grey line represents an equity position, and the colored "hockey-stick-shaped" line represents the combined stock plus options position. For more details, please click on strategies.

CBOE Volatility Index (VIX)