VIX® of VIX (VVIXSM) FAQ

• VVIX

 VIX 27.9 -0.33 SPX 3058.68 2.95 VX22M20 29.4 0 VX23M20 29.25 0 VXM20 29.19 -0.34

The Cboe® VVIXSM Index FAQ

1. What is the VVIX Index?

The Cboe VVIX Index (the VVIX) represents a volatility of volatility in the sense that it measures the expected volatility of the 30-day forward price of VIX®. This forward price is the price of a hypothetical VIX futures contract that expires in 30 days. The VVIX is not the same as the expected volatility of the VIX, but the two are close because nearby VIX futures track the VIX.

2. How does Cboe calculate the VVIX?

The VVIX reflects the price of a portfolio of at-and out-of the money VIX options. The method of calculation is the same as the method used to calculate the VIX from SPX options. The first step is to find expected variances corresponding to different VIX option expirations. The second step is to interpolate a 30-day expected variance. The last step is to take the square root of that number and to multiply it by 100 to express the VVIX in percent. The method used to calculate the VIX is described in detail at http://www.cboe.com/VIX.

3. Does Cboe calculate a term structure of the VVIX?

Cboe calculates VVIX term structure values for all VIX option expirations. The VVIX term structure value associated with a specific expiration, e.g. April 2012, measures the expected volatility of the price of April 2012 VIX futures. The term structure of VVIX is usually downward sloping.

4. How often is the VVIX published?

The Cboe publishes the VVIX every 15 seconds and its term structure daily at the close.

5. What is a typical value of the VVIX?

From 2006 to 2012, the VVIX ranged from 60 to 145 around an average value of 86. That range is much higher than the range of VIX and is typical of statistics of volatility of volatility. For example, over the same period the VIX ranged from 10 to 81 around an average value of 24.

6. Does the VVIX revert to the mean like the VIX?

Yes. The long-term historic mean is 86.

7. Is there a correlation between the VVIX and the VIX?

Historically, there has been little correlation between the VVIX and the VIX except at extreme values of the VIX.

8. How can an investor use the VVIX?

The VVIX and its term structure can inform the VIX trading community about

• the expected volatilities that drive the prices of VIX options at different expirations.
• the expected nearby volatility of the VIX itself.
• the fair values of VIX futures.
• Investors can trade the portfolio of VIX options used to calculate the VVIX or any point on its term structure to help capitalize on deviations between VIX futures prices and their fair values.
• the degree of confidence the market has in its forecast of future values of the VIX.
• the VVIX or a value on its term structure represents the price of a portfolio of VIX options. Selling this "VVIX" portfolio on a consistent basis captures a volatility risk premium. An investor who deems the VVIX or a term structure value to be too high or too low at a particular date can sell or buy the underlying portfolio.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker or from The Options Clearing Corporation at www.theocc.com. Supporting documentation for any claims, comparisons, statistics or other technical data in this document is available by visiting www.cboe.com or contacting Cboe at www.cboe.com/Contact. The information in this document is provided solely for informational purposes is not intended and should not be construed to constitute investment advice or recommendations to purchase or sell securities or futures. Investors should consult their tax advisor as to how taxes affect the outcome of contemplated options transactions. Past performance is not indicative of future results. This document contains index performance data based on back-testing, i.e., calculations of how the index might have performed prior to launch. Backtested performance information is purely hypothetical and is provided in this document solely for informational purposes. Backtested performance does not represent actual performance, and should not be interpreted as an indication of actual performance. The methodologies of the Cboe volatility indexes are owned by Cboe Options Exchange (Cboe) and may be covered by one or more patents or pending patent applications. Cboe®, Cboe Options Exchange®, Cboe Volatility Index®, SPX®, and VIX® are registered trademarks and VVIX is a service mark of Cboe. Standard & Poor's, S&P® and S&P 500® are trademarks of Standard & Poor's Financial Services, LLC and have been licensed for use by Cboe.