This chart shows our proprietary Volatility Index Indicator, along with the VIX and the S&P 500. VIX (Chicago Board Options Exchange Volatility Index) is a measure of expected volatility in the S&P 500, as measured by options trading (both puts and calls) in the S&P 500 index. A high number implies that traders are expected a larger change (volatility) in the market during the upcoming options periods. VIX is measured in percentage points, and implies that traders, based on their options trades, are expecting the S&P 500 to move by that many percentage points (annualized), in the next 30 day period.
For example, a VIX quotation of 20 indicates that traders are expecting the S&P 500 to move (either up or down) by an annualized rate of 20% over the next 30 days. A higher number indicates traders are anticipating more volatility in the near future.
This is another contrarian market indicator, measuring investor sentiment. A high volatility index (VIX) signals higher premiums for stock options, which usually occurs after a market selloff. This timing method seeks out unsustainable changes in option premiums. Our Volatility Index Indicator attempts to take the psychology and emotion out of the trading, by analyzing the changes in implied volatility expectations via an algorithm, and displaying its current reading in standard technical analysis format.
It is important to note that the VIX, while introduced in 1993, did not take its current formula until September, 2003.
The CrystalBull Volatility Index Indicator Chart
( HINT: Click-and-drag left-to-right on the top chart (S&P 500) to zoom in to a specific date range. Double-click on S&P 500 chart to zoom back out. )