What does the CBOE Volatility Index (VIX) measure in investing?
Is a high volatility good?
There is no simple answer to this question as it depends on the circumstances and goals of the trader. In general, high volatility can be seen as both good and bad for traders.
On the one hand, high volatility can be seen as good for traders because it can lead to increased profits. This is because high volatility leads to wider price swings, which provides opportunities to buy low and sell high. This can be especially profitable if the trader is able to correctly predict which way the market will move.
On the other hand, high volatility can also be seen as bad for traders because it can lead to increased losses. This is because high volatility also leads to wider price swings, which means that there is a greater chance of the market moving against the trader's position. This can be especially costly if the trader has made a wrong prediction about which way the market will move.
Ultimately, whether high volatility is good or bad for a trader depends on the individual circumstances and goals of the trader.
How do you hedge with VIX?
There are a few ways to hedge with VIX, the most popular being through the purchase of VIX call or put options, or through the purchase of VIX futures contracts.
Another way to hedge with VIX is through the purchase of exchange-traded products (ETPs) that track the VIX, such as the iPath S&P 500 VIX Short-Term Futures ETN (VXX) or the ProShares Ultra VIX Short-Term Futures ETF (UVXY).
Finally, some investors may choose to hedge their portfolios with inverse VIX ETPs, such as the ProShares Short VIX Short-Term Futures ETF (SVXY) or the VelocityShares Daily Inverse VIX Short-Term ETN (XIV). Can you trade VIX directly? The VIX is a volatility index that is calculated by the CBOE (Chicago Board Options Exchange). It is not an underlying asset, but rather a measure of the implied volatility of S&P 500 options. As such, it is not possible to trade the VIX directly. What is the VIX of VIX? The VIX of VIX is a measure of the volatility of the VIX itself. It is calculated using VIX options prices, and is therefore a forward-looking measure of VIX volatility. It is often used by traders as a predictor of future VIX movements. Which of the following is measured by the VIX Index? The VIX Index is a measure of market volatility, typically used as a predictor of stock market activity.