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Key Takeaways
- VVIX measures 30-day option-implied volatility in the VIX forward-price context.
- A reading of 100 represents 100% annualized volatility.
- Use the corresponding forward level and a consistent time horizon to compare proportional VIX-point scales.
- At a forward of 20, VVIX 80 gives a 30-day scale of 4.59 points; VVIX 100 gives 5.73.
- Compare VIX, VVIX, the forward curve and the selected option strikes before building the position.
What is VVIX?
VVIX is Cboe’s 30-day volatility-of-volatility benchmark, a measure of how much VIX option prices imply the VIX forward will move. It uses VIX option prices and reports an annualized implied-volatility percentage in the VIX forward-price context. A reading of 100 represents 100% annualized volatility.
VIX measures S&P 500 implied volatility from SPX options. VVIX measures implied volatility around VIX forward outcomes. The pair gives traders two connected views of option pricing.
How to convert VVIX into VIX points
Use the same forward and time horizon when comparing VVIX levels. At a VIX forward of 20, the proportional 30-day scale is 4.59 points for VVIX 80 and 5.73 points for VVIX 100. The increase is 1.15 points, or 25%.
The calculation multiplies the forward by VVIX as a decimal and the square root of calendar days divided by 365. At the same readings, the one-calendar-day scales are 0.84 and 1.05 points.
Formula
Proportional VIX-point scale = VIX forward × (VVIX / 100) × √(calendar days / 365)- The example converts the annualized rate into a proportional point scale at a fixed forward level.
- Use the corresponding VIX forward and the same horizon for each comparison.
Worked Example
Hold the relevant VIX forward at 20 and compare VVIX readings of 80 and 100 over one calendar day and 30 calendar days.
- VVIX 80: one-day proportional scale = 20 × 0.80 × √(1 / 365) = 0.84 VIX points
- VVIX 100: one-day proportional scale = 20 × 1.00 × √(1 / 365) = 1.05 VIX points
- VVIX 80: 30-day proportional scale = 20 × 0.80 × √(30 / 365) = 4.59 VIX points
- VVIX 100: 30-day proportional scale = 20 × 1.00 × √(30 / 365) = 5.73 VIX points
- The 30-day proportional scale increases by 1.15 points
With the forward and horizon fixed, the move from VVIX 80 to 100 raises the proportional point scale by 25%. Use the selected option’s strike, expiration and premium to calculate the position’s payoff.
VIX options and the forward curve
Read the VIX forward curve and select the expiration for the position. Standard VIX index options use cash settlement based on a special opening quotation. Their pricing connects to the corresponding forward level and the option’s strike and remaining life.
Compare the selected strike’s implied volatility with neighboring strikes and other expirations. Use vega to examine its sensitivity to option IV, delta for forward-price sensitivity and the full payoff for the expiration result.
How traders use VVIX
Inspect activity and linked legs in the selected expiration. A call purchase, a call spread and a ratio spread express different payoff structures, even when each includes the same strike.
Compare the chosen VIX contracts’ entry premium, breakevens and cash payoff at settlement. Use the matching expiration’s forward and option prices to assess the trade; VVIX describes the broader volatility pricing around it.
Limitations of VVIX
- VVIX is implied from VIX option prices. Read it as the price of VIX movement, and compare it with how much the VIX actually moves to judge whether VIX options are rich or cheap.
- It is quoted against the VIX forward, so converting it to VIX points needs the matching forward level and horizon. The same reading means more points at a higher forward.
- Read the point conversion as a proportional scale. It is not a high-to-low range or a probability.
- Price each VIX option from its own implied volatility. VVIX is one 30-day index, and each expiration and strike carries its own IV.
- Size the payoff from the contract’s own forward and strike. A VIX option settles on a special opening quotation for its own expiration, not on spot VIX or the VVIX level.
Bottom line
VVIX shows how much volatility the options market prices into the VIX itself, which makes it a market-wide reference for VIX option premiums. Convert it to VIX points with the matching forward and horizon, compare it with the selected strikes and expirations, and let the actual contracts, not the index level, define the payoff.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Cboe: Selected Volatility Indices Methodology
- Cboe: Double the Fun with the VVIX Index
- Cboe: VIX Option Volumes and Volatility of Volatility
How entries are sourced, calculated and updated: editorial methodology.