## VIX Index

VIX is the ticket symbol for the Chicago Board Options Exchange Market Volatility Index, it measures the implied volatility of S&P 500 index options and it represents one measure of the market’s expectation of stock market volatility over the next 30 day period. VIX is quoted in percentage points and translates roughly to the expected movement in the S&P 500 index over the next 30-day period, which is then annualized. For example, if the VIX is 15, this represents an expected annualized change of 15% over the next 30 days (1/12 year), thus one can infer that the index option markts expect the S&P 500 to move up or down 15%/SQRT(12) = 4.33% over the next month. That is index options are priced with the assumption of a 68% likelihood (one standard deviation) that magnitude of the S&P 500’s 30 day return will be less than 4.33% (up or down)

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