Do You Know How to Trade the VIX?

Here's a primer on the VIX products

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Do You Know How to Trade the VIX?

With all the new ways to trade volatility, here is a primer on the VIX products:

CBOE OEX Implied Volatility Index (VXO)

vxo1 Do You Know How to Trade the VIX?

I’m starting with the CBOE OEX Implied Volatility Index (CBOE:VXO) rather than the more well-known VIX, because it’s the grandfather of all things indexed volatility.

VXO is the original VIX. Robert E. Whaley invented this pup in 1993, with data calculated back to 1986. It seeks to proxy the implied volatility of a hypothetical at-the-money (ATM) option with 30 days duration. It uses a few series of near-money OEX options to calculate the number. At the time, OEX was the busiest index product. Until 2003, what you see on the board now as VXO was actually called the “VIX.”


Article printed from InvestorPlace Media, http://investorplace.com/2012/05/so-you-think-you-know-how-to-trade-the-vix/.

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