VIX data is available as a graph. Click tab above.
VIX data is available as a graph. Click tab above.
The implied volatility of an option plays a large role in determining the option's price in the marketplace, and is of great interest to options traders. On the volatility page we discuss why volatility is so important to buyers and sellers of options.
Because the implied volatility is constantly changing, option prices often undergo significant price changes, even when the price of the underlying stock is relatively unchanged. Part of the time, due to market conditions, options prices are much higher than usual. At other times, under different conditions, option prices are much lower.
One method used by traders to gauge the current level of volatility (and thus, the level of option prices, in general) is to follow the CBOE Volatility Index (VIX), which measures of the implied volatility of the S&P 500 index. The index is calculated by taking a weighted average of the implied volatilities of eight SPX calls and puts, with an average of 30 days until expiration. Some traders use this index as a general indication of option prices for the entire U.S. equity market. The VIX changes frequently and sometimes suddenly. Thus, by paying attention to current VIX, you know if option prices are currently high or low, from a historical perspective.
Graphs of VIX data are here.How you can use VIX data
These graphs are updated weekly, and you can use them to get a feel for whether current option prices are relatively high or low when compared with historical price levels. More importantly, you can see if these prices are trending higher or lower. This may help you determine whether it's better to buy or sell options at any given time. It's not necessary to use this data when making trading decisions, but it's a good idea to be aware of current option pricing trends.