VVIX

The VVIX is the Cboe index of the volatility of volatility. It measures the 30-day expected volatility of the VIX itself, derived from the prices of VIX options. Where the VIX prices uncertainty on the S&P 500, the VVIX prices uncertainty on that uncertainty.

How it works

Cboe applies the VIX methodology to VIX options: a strip of out-of-the-money calls and puts is turned into a fair variance, interpolated to 30 days and square-rooted. Because VIX options are priced off the VIX future of the same expiry rather than spot VIX, the VVIX reflects the expected volatility of those forward values. Its level is far higher than equity volatility numbers. The VIX is a mean-reverting index that can double in a few sessions, so VVIX readings around 100 are not unusual.

Example

Hypothetical: with the VVIX at 100 and the VIX at 20, the implied one-month standard deviation of the VIX is about 100% / √12, roughly 29% of its level. That is a move of around 5.8 VIX points, up or down, as a one-sigma range over a month.

On the desk

Traders read the VVIX together with the VIX. A high VVIX with a low VIX signals that convexity is expensive: VIX calls and other tail hedges cost more even though headline volatility looks calm. The ratio of the two gives a quick read of what the market charges for a volatility spike relative to the current level.