VIX Futures: The Elite Trader’s Tool for Market Volatility
The CBOE Volatility Index (VIX), known as the 'Fear Index,' remains the Gold standard for gauging investor sentiment and market risk. It measures 30-day volatility expectations for the S&P 500, with readings above 30 signaling fear and below 20 indicating stability. Unlike the VIX itself, which cannot be traded directly, VIX futures (/VX) offer pure exposure to volatility through derivatives.
Launched in 2004, VIX futures are cash-settled instruments favored by sophisticated traders for speculation and hedging. They provide a cleaner alternative to VIX Exchange Traded Products (ETPs) like VXX or UVXY, which suffer from structural drawbacks such as negative roll yield in contango markets. Direct trading of VIX futures allows precise contract selection and roll yield management, isolating volatility exposure (Vega) from directional market risks (Delta).
