What is Vix, volatility index?

Vix, created by the Chicago Board Options Exchange (CBE) in 1993, is an index of volatility. It measures the market expectations of the closest volatility, as reflected in the S&P 500 price prices. VIX is designed using the Black-Scholes Option Appround Price for calculating the expected volatility for a number of composition index options. These are combined to create a total scale of expectations of the market with close volatility. The index was originally designed using the S&P 100 index, but in 2004 the CBoe switched to the S&P 500 to capture the wider segment of the total market. In order to ensure continuity, the older calculation is still published under the name VXO. Vix is ​​VIX meajistly height and width of the curve; Low number means a high top shape, while tall means a short wide shape. It is mathematically expressed as an annual percentage. For example, Vix 15 means that the market is expecting 15% of a change next yearWell prices.

professional options traders often decide to express VIX and other expected volatility as a daily percentage. Because they continuously regulate their positions based on market conditions, the greatest risk for them is when the markets are closed and modifications cannot be made. Calculated as a daily percentage, VIX provides an estimate of how much the market could change between closing and re -opening. Daily score can be approximated by distributing annual number 16.

Vix has appeared a large number of market tradition. Sometimes it is referred to as the "meter of fear of the investor", because Attendence is to rise sharply when the markets are stressed. However, it is important to note that the index measures sentiment, measures only the expected volatility . Because the expected volatility is most significantly influenced by the changes of real volatility, its period of market stress is not caused by investors' sentiment but by increasing the actualvolatility.

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