CBOE announces options on VIX

The Chicago Board Options Exchange (CBOE) announced today that options on the CBOE Volatility Index, VIX, (ticker symbol VXB) will begin trading on Friday, April 22, 2005.

VIX is commonly referred to as the market's "fear gauge."

Futures on the CBOE Volatility Index (ticker symbol VX) were launched a year ago and trade on the CBOE Futures Exchange (CFE).

VIX is derived from real-time S&P 500 Index option prices and designed to reflect investors' consensus view of expected stock market volatility over the next 30 days. This is known as "implied volatility", referring to the future, as opposed to simple volatility which is "historical volatility" and a measure of past, actual volatility.

VIX is considered the "investor fear gauge" since during the market declines that typically accompany times of financial stress, investors buy portfolio protection in the form of index options. Conversely, demand for those options falls as the market rises and investors feel less urgent need for "insurance".

VIX is essentially a measure of the demand for those index options. Greater demand results in a higher VIX and lower demand results in a lower VIX.

Read the press release.

-- Jack Krupansky