Calculating the VIX—The Easy Part

The movements of the CBOE’s VIX® are often confusing.  It usually moves the opposite direction of the S&P 500 but not always.  On Fridays the VIX tends to sag and on Mondays it often climbs because S&P 500 (SPX) option traders are adjusting prices to mitigate value distortions caused by the weekend. In addition to these market driven eccentricities the actual calculation of the VIX has …

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How Does the Cboe’s VIX® Index Work?

The Cboe did not create the VIX® as an academic exercise, or as a service to stock market prognosticators everywhere.  They created it because they wanted to make money on volatility.  It took them two tries, but the Cboe succeeded in developing a volatility index that forms the backbone of a host of volatility products.  The Cboe offers some of these products, but other companies have …

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Top 11 Questions About the CBOE’s VIX

Based on searches that lead people to Six Figure Investing, these are the top 10 questions people ask about volatility investing: How can I buy/trade/invest in the CBOE’s VIX® index?   The short answer is that you can’t.  No one has figured out how to do this economically. However, there are quite a few investment approaches that allow you to trade in volatility, including futures, options on …

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Graphical Representation of CBOE’s VIXMO Calculation (Redirected)

The dynamically updated chart above uses delayed quotes from Google Finance.  It details the interpolation / extrapolation process that computes the 30 day VIXMO from two close-in months of SPX options (VINMO and VIFMO).  This calculation is the legacy version of the VIX that was used from 23-Sept-2003 through 5-Oct-2014.  On October 6th, 2014 the CBOE modified the calculation to start using SPX weekly options …

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Calculating VIXMO—the Easy Part

Update:  On October 6th, 2014 the CBOE changed the calculation method for the VIX to include SPX weekly options,  the old VIX calculation is still being reported using the VIXMO  (VIX Month Only) ticker.  The new calculation uses the VIX ticker.  For more on the new calculation see “Calculating the New VIX“.   The movements of the CBOE’s VIX® are often confusing.  It usually moves the …

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