Stock Market News From Feb 20, 2024: S&P 500, Nasdaq Composite Drop; Nvidia, Capital One, Discover, Tesla, and More Market Movers; Walmart, Home Depot Earnings

Examples include the CBOE Short-Term Volatility Index (VIX9D), which reflects the nine-day expected volatility of the S&P 500 Index; the CBOE S&P Month Volatility Index (VIX3M); and the CBOE S&P Month Volatility Index (VIX6M). Products based on other market indexes include the Nasdaq-100 Volatility Index (VXN); the CBOE DJIA Volatility Index (VXD); and the CBOE Russell 2000 Volatility Index (RVX). It should be noted that these are rough guidelines ⏤ unexpected events can throw a wrench into markets and a low VIX level today could be followed by a period of extreme volatility if circumstances change. Shares of Nvidia, among the high-profile megacap stocks that led the market higher in 2023 amid artificial intelligence excitement, were down 6.3% a day prior to the chip maker’s fourth-quarter earnings report. With implied volatility spiking, consumer staples were an outlier in the session.

During the time period mentioned above, despite some concerns about the market, the overall IAI actually moved lower. Many or all of the products featured hire ukrainian software developers here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.

Understanding it all can be complicated, so let’s take a closer look at what it means. It is important when trading VIX products that one understands its inverse relationship to the equity markets. The VIX will usually rise in value (price) as the stock market (primarily the S&P index) declines. The CBOE Volatility Index (VIX) is a measure of expected price fluctuations in the S&P 500 Index options over the next 30 days. The VIX, often referred to as the «fear index,» is calculated in real time by the Chicago Board Options Exchange (CBOE). Perhaps the most straightforward way to invest in the VIX is with exchange-traded funds (ETFs) and exchange-traded notes (ETNs) based on VIX futures.

The VIX was the first benchmark index introduced by CCOE to measure the market’s expectation of future volatility. The most significant words in that description are expected and the next 30 days. The predictive nature of the VIX makes it a measure of implied volatility, not one that is based on historical data or statistical analysis.

It is an important index in the world of trading and investment because it provides a quantifiable measure of market risk and investors’ sentiments. The formula used by Cboe to calculate the price of VIX is rather complex, and the price of VIX is updated live during trading hours every 15 seconds. To spare you the math headache involved with calculating the price, let’s look instead at the data used to calculate it. The VIX index is specifically measuring expected volatility for another index, the S&P 500.

  1. Astute investors tend to buy options when the VIX is relatively low and put premiums are cheap.
  2. That is enough time for investors to make decisions and act on them, but close enough to add a note of urgency if significant change is forecast.
  3. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
  4. When implied volatility is high, the VIX level is high and the range of likely values is broad.
  5. The VIX Network is an association of exchanges and index providers dedicated to establishing standards that help investors understand, measure, and manage volatility.
  6. For instance, in the three months between Aug. 8, 2017, and Nov. 8, 2017, the VIX was up 19%—seemingly suggesting anxiety among market participants and implying that the S&P 500 should be on a downward trajectory.

Alternatively, you could adjust your asset allocation to cash in recent gains and set aside funds during a down market. VIX is at a current level of 14.54, down from 15.34 the previous market day and down from 22.29 one year ago. This is a change of -5.22% from the previous market day and -34.77% from one year ago.

How Can You Invest in the VIX?

If many of the large investment firms are anticipating the same thing, there is usually a spike in options trading for the S&P 500. The VIX index uses the bid/ask prices of options trading for the S&P 500 index in order to gauge investor sentiment for the larger financial market. The VIX, formally known as the Chicago Board Options Exchange (CBOE) Volatility Index, measures how much volatility professional investors think the S&P 500 index will experience over the next 30 days.

Volatility value, investors’ fear, and VIX values all move up when the market is falling. The reverse is true when the market advances—the index values, fear, and volatility decline. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. But this compensation does not influence the information we publish, or the reviews that you see on this site.

Sometimes in the media they will refer to this as «Greed» or «Complacency», however what is really happening is that the options premium is below and continuing to decline further than where the mean «should be». This is subjective, but can certainly be seen and experienced at its extremes. Sentiment plays a big role in decision making for the stock markets, and to that extent, it could be a good idea to glance at the VIX.


When uncertainty and fear hits the market, stocks generally fall, and your portfolio could take a hit. But having a small amount of money invested in an ETF that tracks the VIX can help dampen the blow. Shares of Nvidia, a leader of 2023’s artificial intelligence stock rally, fell 4.4% ahead of its earnings report after the market closes on Wednesday. Technology stocks led the market lower as volatility spiked ahead of tomorrow’s key earnings report from Nvidia.

Can you invest in the VIX?

The VIX is considered a reflection of investor sentiment, but one must remember that it is supposed to be a leading indicator. In other words, it should not be construed as a sign of an immediate market movement. Experts understand what the VIX is telling them through the lens of mean reversion. In finance, mean reversion is a key principle that suggests asset prices generally remain close to their long-term averages. If prices gain a great deal very quickly, or fall very far, very rapidly, the principle of mean reversion suggests they should snap back to their long-term average before long. Market professionals rely on a wide variety of data sources and tools to stay on top of the market.

Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. The Cboe Volatility Index, better known as VIX, projects the probable range of movement in the U.S. equity markets, above and below their current level, in the immediate future. Specifically, VIX measures the implied volatility of the S&P 500® (SPX) for the next 30 days. When implied volatility is high, the VIX level is high and the range of likely values is broad. When implied volatility is low, the VIX level is low and the range is narrow.

Rising Vix likely portends more losses ahead for stocks, history shows

As exchange-traded products, you can buy and sell these securities like stocks, greatly simplifying your VIX investing strategy. Active traders who employ their own trading strategies and advanced algorithms use VIX values to price the derivatives, which are based on high beta stocks. Beta represents how much a particular stock price can move with respect to the move in a broader market index. For instance, a stock having a beta of +1.5 indicates that it is theoretically 50% more volatile than the market.

It gives a current and accurate measure of where options premium in the S&P 500 index is trading. However, it is very important that we understand that the VIX is not right or wrong in its current or forecast measurement of S&P 500 volatility. It is just where the market is willing to trade the premium or current measurement of risk. At the extremes we see that it is wrong and quickly tries to compensate, as buyers quickly become sellers or sellers quickly turn into buyers.


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