A
- At-the-Money (ATM)
- Options with strike price equal to current underlying price. ATM options have maximum time value.
- Annualized Volatility
- Standard deviation of returns scaled to one year. VIX represents annualized 30-day implied volatility.
B
- Backwardation
- Market condition where near-term futures trade above longer-dated contracts. Indicates immediate hedging demand.
- Beta-weighted
- Portfolio positions adjusted for correlation to benchmark. Used to calculate aggregate volatility exposure.
- Black-Scholes Model
- Options pricing model that derives implied volatility. Foundation for VIX calculation methodology.
C
- CBOE
- Chicago Board Options Exchange. Creator and calculator of the VIX index.
- Contango
- Normal futures curve where longer-dated contracts cost more than near-term. Primary source of VIX ETF decay.
- Correlation
- Statistical relationship between assets. VIX typically shows -0.7 to -0.9 correlation with S&P 500.
- Call Option
- Right to buy underlying at strike price. VIX calls profit from volatility spikes.
D
- Daily Roll
- Process where VIX ETFs sell expiring futures and buy next month. Creates systematic losses in contango.
- Decay
- Value erosion in VIX ETFs from contango and volatility drag. Can exceed 90% annually.
- Delta
- Option price change per underlying move. VIX options have unique delta due to futures pricing.
E
- ETF (Exchange-Traded Fund)
- Securities tracking indexes traded like stocks. VIX ETFs (VXX, UVXY) track VIX futures.
- ETN (Exchange-Traded Note)
- Debt securities tracking indexes. Some VIX products are ETNs with credit risk.
- European-style
- Options exercisable only at expiration. All VIX options are European-style.
- Expected Move
- Implied price range from options. VIX/√12 approximates monthly S&P 500 expected move.
F
- Fear Gauge
- VIX nickname reflecting its tendency to spike during market fear and uncertainty.
- Futures Curve
- Relationship between different expiration futures prices. Shape indicates volatility expectations.
- Front Month
- Nearest expiration futures contract. VX1 represents front-month VIX futures.
G
- Gamma
- Rate of delta change. High gamma creates explosive VIX moves during market stress.
- Greeks
- Risk measures for options: Delta, Gamma, Theta, Vega, Rho.
H
- Historical Volatility (HV)
- Actual past price movement volatility. Also called realized volatility.
- Hedging
- Risk reduction through offsetting positions. VIX products hedge equity portfolios.
I
- Implied Volatility (IV)
- Market's expectation of future volatility from options prices. VIX measures 30-day S&P 500 IV.
- In-the-Money (ITM)
- Options with intrinsic value. Calls with strike below underlying, puts above.
- Inverse ETF
- Products moving opposite to underlying. SVXY provides inverse VIX futures exposure.
L
- Leverage
- Amplified exposure to underlying. UVXY provides 1.5x leveraged VIX futures exposure.
- Long Volatility
- Positions profiting from increased volatility. Includes long VIX calls, futures, ETFs.
M
- Mean Reversion
- Tendency to return to average. VIX exhibits strong mean reversion around 16-18.
- Moneyness
- Relationship between strike and underlying price. Determines intrinsic value.
N
- Near-the-Money
- Options with strikes close to current underlying price.
- Normal Volatility
- VIX between 12-20, representing typical market conditions.
O
- Options Chain
- List of available options by strike and expiration. VIX options chain reveals volatility expectations.
- Out-of-the-Money (OTM)
- Options with no intrinsic value. VIX OTM calls provide cheap crisis insurance.
P
- Put Option
- Right to sell at strike price. S&P 500 puts drive VIX calculation.
- Put/Call Ratio
- Sentiment indicator. High ratio indicates fear, low suggests complacency.
R
- Realized Volatility
- Actual historical price volatility. Often compared to implied volatility.
- Roll Cost
- Loss from selling expiring futures and buying further-dated. Primary VIX ETF headwind.
- Risk Premium
- Extra return for bearing volatility risk. Implied volatility typically exceeds realized.
S
- SKEW
- Measure of S&P 500 tail risk from options. High SKEW indicates crash concerns.
- SOQ (Special Opening Quotation)
- VIX options settlement value on Wednesday morning expiration.
- Spot VIX
- Current VIX index level. Cannot be directly traded.
- SVXY
- ProShares Short VIX Short-Term Futures ETF. Profits from declining volatility.
T
- Term Structure
- Relationship between different maturity VIX futures. Indicates volatility expectations over time.
- Theta
- Time decay rate. VIX options have extreme theta near expiration.
- Tail Risk
- Probability of extreme market moves. VIX products hedge tail events.
V
- VIX (CBOE Volatility Index)
- Measure of 30-day expected S&P 500 volatility from options prices.
- VIXY
- ProShares VIX Short-Term Futures ETF. Tracks short-term VIX futures.
- VIX9D
- 9-day expected S&P 500 volatility. More responsive than 30-day VIX.
- VIX3M
- 3-month expected volatility. Less volatile than standard VIX.
- VIX6M
- 6-month expected volatility. Reflects longer-term uncertainty.
- Volatility Clustering
- Tendency for high/low volatility to persist. Creates trending VIX periods.
- Volatility Drag
- Performance erosion from daily rebalancing in leveraged products.
- Volatility Risk Premium
- Difference between implied and realized volatility. Source of short volatility profits.
- Volatility Smile
- Pattern of implied volatility across strikes. VIX options show pronounced smile.
- Volatility Surface
- 3D representation of IV across strikes and expirations.
- VVIX
- VIX of VIX. Measures expected volatility of the VIX index itself.
- VX Futures
- VIX futures contracts. Traded on CBOE with monthly expirations.
- VXX
- iPath Series B S&P 500 VIX Short-Term Futures ETN. Most liquid VIX ETP.
- VXN
- CBOE NASDAQ Volatility Index. VIX equivalent for NASDAQ-100.
W
- Weekly Options
- Options expiring weekly. VIX weeklies available for short-term volatility trades.
- Whipsaw
- Sharp reversals causing losses on both sides. Common in volatile VIX regimes.