Will fear return to the markets? VIX with the biggest increase in a year

VIX index, also known as the "fear index" or "volatility index", is an indicator that measures the expected fluctuations of the S&P500 Index in the United States over the next 30 days. The VIX index is used to assess the level of uncertainty and risk in financial markets. It is one of the most important volatility indicators in the world.

The VIX index is calculated based on option prices on S&P 500 index, which is one of the most important stock indexes in the US. The VIX Index uses option prices to estimate expected near-term price movements for stocks (SPX). The higher the VIX level, the higher the expected volatility in the stock market, which may indicate greater risk and uncertainty.

The VIX index is often called the "fear index" because its value increases during periods when investors are more uncertain and fearful of a decline in market prices. In practice, this means that the VIX index tends to rise during periods of financial crises, stock market declines, or other events that cause investor uncertainty.

Investors and traders use the VIX index as a tool to manage risk and assess the level of uncertainty in markets. An increase in the value of the VIX may prompt investors to seek more defensive investment strategies or hedge against declines in stock prices.

VIX grows the most in a year

September 2023 brings the largest monthly increase in the value of the VIX index in a year, i.e. since September 2022. Currently, it is an increase of 17.7% to 15,96 points, whereas in September last year the index increased by 22,24% to 31,77 points. Currently, the VIX index is at its highest level in three weeks.

Moreover, since the VIX reached its local high in October 2022, its value has been falling to the low of a week ago. At the same time, speculative positions among non-commercial investors on contracts were increasing. Long positions increased from 60 thousand. contracts up to over 100 thousand Currently. Net long positions also shrank from -105. to -39 thousand (all this while the index is falling). This behavior may show that declines in value were used by speculators to accumulate at a lower cost.

VIX and implications for SPX

Based on the value of the VIX index, you can calculate the expected volatility for the SPX index over a month and a year. And so, on a monthly basis, the current range of fluctuations with the index at the level of 4402 points is 4199 and 4605 ​​points. (VIX implies about 4,5% of the expected change SPX per month).

Meanwhile, the annual expected volatility is the value of the VIX index itself in percentage terms, and when translated into points it ranges from 5105 to 3698 points.

WHAT IS THE VIX INDEX – VIDEO