Has the VIX Recently Been “Low”?

When I deliver presentations on the road I often hear from investors that they are surprised that the CBOE Volatility Index® (VIX®) has been relatively low compared to its long-term average, especially in light of worldwide market uncertainties and press stories.  Since 1990 the average daily close for the VIX Index was 20.3, but in the first half of 2013: (1) the VIX average daily close was 14.2, and (2) the VIX closed above 20 on only two days – June 20th (at 20.49) and June 24th (at 20.11). Yesterday (Tuesday) the VIX closed at 14.35.


Some investors ask – has the VIX recently been too “low”?  My answer to them is – while the market’s expected volatility (as measured by the VIX) has been low compared to its long-term average, the historic volatility for the S&P 500® (SPX) Index recently has been even lower than the VIX Index – please see the chart below.   In the first half of 2013, the average daily close was 14.2 for VIX, and 11.9 for the 30-day historic volatility for SPX.  VIX has not been “low” when compared with recent SPX historic volatility.

11VIX and SPX Historic

The 30-day historic volatility of the S&P 500 Index fell to 7.28 on February 15, 2013, its lowest level in more than two years.  In the first half of 2013 the highest level of 30-day historic volatility for the SPX Index was 15.91 on June 27.  In the 1st half of 2013 the worst one-day drop for the SPX Index was a 2.5% fall on June 20th, while in 2011 the SPX fell more than 2.5% on a dozen different days. (Source: Bloomberg).


I also receive questions as to what VIX measures and if VIX still works as intended.  The 4-page 2009 CBOE paper “VIX – Fact & Fiction” provides answers to many questions, and notes that –

“VIX measures the market’s expectation of future volatility implied by S&P 500® stock index (SPX) options prices. In other words, VIX uses options pricing as a way to measure perceived market risk and uncertainty.”

The paper also deals with other topic such as whether VIX measures fear or historic volatility, and if it predicts future volatility.


VIX is more than just a hypothetical indicator.  Investors use VIX options and futures for portfolio management.  Average daily volume in the first half of 2013 grew to 588,897 for VIX options and 166,642 for VIX futures.

12VIX opt Fut Jun


For more information on VIX (including price data, futures and options info, and a bibliography) please visit www.cboe.com/VIX.

  • Adam Acuo

    Hi Matt, an interesting article. I’m not sure how far back your analysis goes – but I ran a volatility based hedge fund in the 2002-2004 time period that was very successful in using options to construct a position in which we arbitraged implied volatility for actual volatility – in essence we were betting that actual volatility realized over our hold period would be lower than the volatility implied in the underlying options that we were selling. We hedged this buy buying out of the money puts and calls to limit our exposure to black swan type of events – and it worked quite well. With the implied volatility being much lower today, I’m not sure if there’s enough premium in the options to cover the costs of the trade (including the black swan cover).