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How does the VIX index measure future volatility?

To measure future volatility, the VIX index uses the weighted prices of the S&P 500 index (SPX) options trading. The prices used to calculate the price of the VIX are midpoints of real-time S&P 500 option bid/ask price quotations, according to Cboe. As investor uncertainty increases, the price of the VIX increases correspondingly.

Is the VIX index inversely related to the S&P 500?

Typically, the performance of the VIX index and the S&P 500 are inversely related to each other. In other words, when the price of VIX is going up, the price of the S&P 500 is usually heading south. Understanding how the VIX index is calculated can help investors gauge market sentiment based on its price.

What does the price of Vix mean?

The price of VIX can guide your decision making on when to buy or sell securities. As a general rule, when the price of VIX is: $0-15, this usually indicates optimism in the market and very low volatility. $15-25, there is typically a moderate amount of volatility, but nothing extreme.

When do VIX futures expire?

VIX Weeklys futures began trading on CFE in 2015 and provide market participants with additional opportunities to establish short-term VIX positions and to fine-tune the timing of their hedging and trading activities. Weekly expirations for VIX futures are generally listed on Thursdays (excluding holidays) and expire on Wednesdays.

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