CBOE Rolls Out 6-Month Volatility Index

Yesterday, while most people were checking flights and hoping they could get where they wanted to be for Thanksgiving Day, the CBOE introduced a new volatility index.  The CBOE Mid-Term Volatility Index (VXMT – 16.65) is a measure of the expected volatility of the S&P 500 Index over a 6-month time horizon.   Just under two months ago the CBOE Short-Term Volatility Index (VXST – 11.66) was introduced as a measure of expected S&P 500 9-day volatility.  These two newer indexes join the widely recognized CBOE Volatility Index (VIX – 12.98) and CBOE 3-Month Volatility Index (VXV – 14.60) to offer a suite of volatility indexes that can be used to demonstrate a representation of expected volatility and key points along the SPX option term structure.

The chart below shows the year to date daily price changes for all four indexes in 2013.


Note that the nearer dated VXST is often at the lowest level and the next VXMT has the highest reading.  The exceptions to this occurs when there are periods of high volatility when VXST runs up more quickly than the other three longer dated volatility indexes.  The table below demonstrates the price action for all four volatility indexes this year.


The top two lines on this table show the closing high and low for each index in 2013.  The third line shows the 2013 high to low range.  Note that the range is more dramatic for VXST and progressively gets smaller based on the time frame being measured by the index.  Also note the average for each index moves up based on the time frame being measured.