Volatility indices track the ratio of puts to calls Options for all assets or commodities within a given market, e.g. another stock index like the S&P 500.
It is possible to trade derivative instruments like Options on a Volatility index itself to potentially profit from an opinion about Volatility. As with other Index Options, these are usually cash-settled contracts.
The VIX is the most commonly discussed Volatility index, but there are a number of others that track Volatility in other markets such as the Russell 2000 (RVX), UK FTSE 100 (VFTSE) or German DAX (VDAX) and a variety of other regional markets. Further there are more specialised Volatility indices that use commodities like Oil or larger individual stocks.
Contributed by: Ralph Windsor
It is possible to trade derivative instruments like Options on a Volatility index itself to potentially profit from an opinion about Volatility. As with other Index Options, these are usually cash-settled contracts.
The VIX is the most commonly discussed Volatility index, but there are a number of others that track Volatility in other markets such as the Russell 2000 (RVX), UK FTSE 100 (VFTSE) or German DAX (VDAX) and a variety of other regional markets. Further there are more specialised Volatility indices that use commodities like Oil or larger individual stocks.
Related Directory Entries
External Links
CBOE Volatility Index (VIX)http://www.cboe.com/micro/vix/vixintro.aspx
CBOE introduction to the VIX.
View CBOE Options Dictionary in Options Market Glossary Directory
VDAXhttp://deutsche-boerse.com/dbg/dispatch/en/kir/dbg_nav/about_us/30_Services/40_Know_how/10_Stock_Exchange_A_Z?glossaryWord=pi_glos_vdax
Deutsche Börse glossary entry describing the VDAX.
FTSE 100 VIX (VFTSE)http://uk.investing.com/indices/ftse-100-vix
Investing.com quote for the VFTSE
CBOE Russell 2000 Volatility Index (RVX)http://www.cboe.com/micro/rvx/
CBOE page describing the RVX (Russell 2000 volatility index).
View CBOE Options Dictionary in Options Market Glossary Directory
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