Cboe Global Markets, a global derivatives and securities exchange network, has launched the Cboe 1-Day Volatility Index, which has been designed by the company’s in-house innovation hub and seeks to measure the expected volatility of the S&P 500 Index over a single trading day.
Cboe Global Markets, a global derivatives and securities exchange network, has launched the Cboe 1-Day Volatility Index (VIX1D), which has been designed by the company’s in-house innovation hub and seeks to measure the expected volatility of the S&P 500 Index over a single trading day.
Similar to the Cboe Volatility Index (VIX Index), the VIX1D Index estimates expected volatility by aggregating the weighted prices of PM-settled SPX (SPXW) options with one- to zero- day expirations over a wide range of strike prices.
Specifically, the prices used to calculate VIX1D Index values are midpoints of real-time, SPXW option bid/ask price quotations.
Launched 30 years after the original Cboe Volatility Index (VIX Index) debuted in April 1993, the VIX1D Index is a natural complement to the 30-day VIX Index and Cboe’s entire VIX Index suite, including the VIX 1-year, VIX 6-month, VIX 3-month and VIX 9-day Indices. The new, non-tradable 1-day volatility index is designed to provide real-time information about the expected volatility of the current trading day.
The VIX1D Index and the VIX Index use a similar methodology to estimate expected volatility. The VIX1D Index has been designed to account for the compressed measurement of expected volatility over a single day and differs from the VIX Index in ways to account for this. By its nature, the VIX1D Index is expected to generally behave in a more volatile manner than indices that measure a longer time horizon of expected volatility. This is because news events that affect the S&P 500 Index on a given day are expected to have a larger impact in short-dated SPX options than in longer dated options when market participants have more time to react to the news event.
For example, amid the recent collapse of two US banks between 8 March, 2023, and 13 March, 2023, the VIX Index rose from 19.11 to 26.52 (38.8%) while the backtested VIX1D Index rose from 15.30 to 40.19 (162.7%) over this period. On days of heightened volatility, the VIX1D Index is expected to reflect short-term impacts, whereas by its design, the VIX Index is expected to continue to reflect expected volatility 30 days out.
VIX1D Index data is available on Bloomberg and other data vendors under the ticker VIX1D.
