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CBOE Volatility Index (VIX) from December 1985 to May 2012 (daily closings) In finance, volatility (usually denoted by "σ") is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices.
VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options.
An option’s implied volatility (IV) gauges the market’s expectation of the underlying stock’s future price swings, but it doesn’t predict the direction of those movements.
(Under mean reversion, above-average VIX values tend to be followed by below-average values, and vice-versa; stock returns share the same property.) However, that relationship may be breaking down.
Implied volatility, a forward-looking and subjective measure, differs from historical volatility because the latter is calculated from known past returns of a security. To understand where implied volatility stands in terms of the underlying, implied volatility rank is used to understand its implied volatility from a one-year high and low IV.
Volatility risk is the risk of an adverse change of price, due to changes in the volatility of a factor affecting that price. It usually applies to derivative instruments , and their portfolios, where the volatility of the underlying asset is a major influencer of option prices .
Volatility is up, and the S&P 500 chalked both its best and worst day of the year this past week. And that you can have both in the span of a few days is an important market lesson.
The purpose of Bollinger Bands is to provide a relative definition of high and low prices of a market. By definition, prices are high at the upper band and low at the lower band. This definition can aid in rigorous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions. [3]