Volatility Indices

Volatility Indices measure the implied volatility of the market based on put and call options for a given security, index or ETF.

How does it work?

For financial instruments like stocks, volatility is a statistical measure of the degree of variation in their trading price observed over a period of time. In the world of investments, volatility is an indicator of how big (or small) moves a stock price, a sector-specific index, or a market-level index makes, and it represents how much risk is associated with the particular security, sector or market.

One of the more popular Volatility Indices is the CBOE Volatility Index (VIX) which is based on the S&P 500 Index options.