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/VX vs. VIX - Apr 27, 2015 | Options Jive
How are the VIX futures related to the VIX index? Tom Sosnoff and Tony Battista talk about the two volatility products and what you should know about them.
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      Options Jive

      /VX vs. VIX

      Apr 27, 2015

      Today, Tom Sosnoff and Tony Battista talk about the most interesting index/future pair in the market, /VX and VIX.

      The VIX is a cash-settled index that is derived from the value of SPX options in the standard and weekly cycles with 23 to 37 days to expiration. The VIX value represents the 30-day implied volatility (forward-looking expected range) of SPX expressed as an annualized percentage. For example, a VIX of 15 represents a 30-day, one standard deviation move that translates to 15% in annualized terms.

      On the other hand, VIX futures (/VX) are simply futures contracts that are traded to express the anticipation of movement in implied volatility on the S&P 500. So, if traders believe volatility will rise in the future, they will buy VIX futures, and vice versa.

      There are options on the VIX index, but they are slightly different than normal equity options. The difference is that VIX index options are priced to the corresponding /VX futures contract, and not the VIX index number. This is because on the day of the VIX settlement, the /VX futures contract and VIX will be the same. In fact, they both settle to the same exact number, which is the ticker VRO.

      Join Tom Sosnoff and Tony Battista as they dive into this topic in more detail, as well as add their own insights. After this segment, you will understand the relationship between the VIX index, its options, and /VX futures.

      This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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