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Technical Analysis, Studies, Indicators:VIX, VXN and VXO Volatility IndexesThe VIX (CBOE Volatility Index) is based on the S&P 500 stock index option prices and measures the market expectations of near-term volatility. The VIX has been introduced in 1993. VIX is considered an indicator of investor sentiment and market volatility. The VXN (CBOE NASDAQ Volatility Index) and VXO (CBOE Volatility Index) are other volatility indexes. VXN is based on the NASDAQ 100 index (NDX) options. VXO is based on the S&P 100 index (OEX) options. Until 2003, the VIX index calculation was based on the CBOE S&P 100 index (OEX). With the introduction of the new and revised, more robust calculation methodology, the underlying index was changed to the CBOE S&P 500 Index options (SPX). Yet, the CBOE has made a decision to continue calculating volatility index based on the S&P 100 under the new ticker - VXO volatility index. The high volatility index value indicates the increased panic in the stock market. At the same time the low volatility index would indicate more stability in the market.
Chart 1: VIX, VXN, VXO and S&P 500
The volatility indexes are used in trading systems to trade
underlying options and futures (VIX options and futures,
S&P 500 options ...) as
well as a measurement of the market sentiment in the
trading systems based on
the index analysis.
Chart 2: High VIX and S&P 500 support
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