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CBOE VIX Whitepaper

CBOE I 2015


In 1993, the Chicago Board Options Exchange® (CBOE®) introduced the CBOE Volatility Index® (VIX® Index), which was originally designed to measure the market’s expectation of 30-day volatility implied by at-the-money S&P 100® Index (OEX® Index) option prices. The VIX Index soon became the premier benchmark for U.S. stock market volatility. It is regularly featured in the Wall Street Journal, Barron’s and other leading financial publications, as well as business news shows on CNBC, Bloomberg TV and CNN/Money, where VIX is often referred to as the “fear index.”

Ten years later in 2003, CBOE together with Goldman Sachs, updated the VIX to reflect a new way to measure expected volatility, one that continues to be widely used by financial theorists, risk managers and volatility traders alike. The new VIX is based on the S&P 500® Index (SPXSM), the core index for U.S. equities, and estimates expected volatility by averaging the weighted prices of SPX puts and calls over a wide range of strike prices. By supplying a script for replicating volatility exposure with a portfolio of SPX options, this new methodology transformed VIX from an abstract concept into a practical standard for trading and hedging volatility.

In 2014, CBOE enhanced the VIX Index to include series of SPX WeeklysSM. First introduced by CBOE in 2005, weekly options are now available on hundreds of indexes, equities, ETFs and ETNs and have become a very popular and actively-traded risk management tool. Today, SPX Weeklys account for one-third of all SPX options traded, and average over a quarter of a million contracts traded per day1.

The inclusion of SPX Weeklys allows the VIX Index to be calculated with S&P 500 Index option series that most precisely match the 30-day target timeframe for expected volatility that the VIX Index is intended to represent. Using SPX options with more than 23 days and less than 37 days to expiration ensures that the VIX Index will always reflect an interpolation of two points along the S&P 500 volatility term structure.

The CBOE's entire whitepaper can be found here.



Investing involves risk, including the possible loss of principal. Carefully consider the Strategy’s investment objectives, risk factors, charges and expenses before investing. This Strategy is actively managed and there is no guarantee investments selected and strategies employed will achieve the intended results. Strategy is subject to change. Active management may also increase transaction costs. The Strategy is not diversified, and narrowly focused investments may be subject to higher risk.

Past performance does not guarantee future results. This information has been provided by Invest In Vol. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This is not to be construed as an o er to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment-making decision. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. The views and opinions expressed are those of the portfolio manager at the time of publication and are subject to change. There is no guarantee that these views will come to pass. As with all investments there are associated inherent risks. Please obtain and review all financial material carefully before investing. Investments are subject to change without notice.

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