VIX Recently Has Been “High” When Compared with SPX Historic Volatility

Over the past year, and particularly at times when the CBOE Volatility Index® (VIX®) was below 15, several people have asked me questions such as –

  • Why is the VIX so low?
  • Shouldn’t the VIX be at higher levels, particularly in light of worldwide uncertainties and volatility?

An argument could be made that VIX recently has been at relatively low levels when compared to its long-term averages; the average daily closing levels for the VIX were (a) 13.05 so far in 2013; and (b) 20.4 for VIX since the inception of VIX data in January 1990.  The fact that the VIX has been about 7 points below its long-term average has been a key factor in facilitating the record volume in both VIX futures and VIX options in January 2013; some investors like to buy VIX call options and VIX futures for diversification and catastrophe-protection purposes when the VIX is below 15.

On the other hand, one could make the argument that VIX recently has been somewhat high when compared to the concurrent 30-day historic volatility of the S&P 500® (SPXTM) Index. Over the past year the average daily closing values were 17.1 for the VIX Index and 12.8 for the 30-day historic volatility of the SPX Index.   

This first chart has a comparison of the two values since January 2008 —

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The second chart is from Exhibit 12 of a paper by Hewitt EnnisKnupp – The CBOE S&P 500 BuyWrite Index (BXM) – A Review of Performance (2012). The paper states that the difference between implied volatility and realized volatility is a risk premium earned by the investor.


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A number of papers available at (including the paper by Hewitt EnnisKnupp) make the point that option-writing benchmark indexes have had relatively strong risk-adjusted performance, in part because implied volatility for SPX options usually has been higher than realized volatility.

You could try exploring the Benchmark Indexes and Education sections of the CBOE website to learn more about the writing of index options and the potential for higher yields and lower volatility in your portfolio.