R. MAK.

Here in this article I will explain you VIX definition, history, calculation and its trading strategy.

VIX Definition

In order to measure the bearish or bullish nature of the broad market traders use VIX or volatility Index.  In order to do this VIX measure the implied volatility of the S&P 500 index options.  The expected volatility of the market is displayed by VIX in 30 days out in the future.

It is believed by the traders that the VIX is a good indication of the fear in the market.  This is due to the reason that if the VIX reaches extreme levels, then this means that a number of traders have purchased puts as insurance against a falling market.

History of the VIX

In 1993 a professor at Duke University Robert E. Whaley first published  VIX. He was able to create the first index that can be used to track the volatility which is associated with underlying exchange traded futures and options.

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