Now with Purple Trading: VIX volatility index as a tradable CFD futures symbol

The volatility or market uncertainty index (VIX) is an invaluable tool used by many when analyzing markets. However, its trading also holds great potential. That's why we have decided to include it alongside our CFD futures symbols. Read this article and find out how and when to trade VIX as an CFD futures symbol.

What is the VIX index and what does it indicate

The Volatility Index (VIX), as the name suggests, is an index that is used to measure the level of market nervousness, uncertainty, and volatility. For these reasons, it is also sometimes called a fear gauge or fear index. The higher the VIX index values get, the greater the uncertainty in the markets and vice versa. However, it is very important to remember that the VIX index is a forward-looking index, so it shows the expected, not actual, market uncertainty.
 

How the VIX index is calculated

VIX index measures 30 days of expected volatility of S&P 500 index, it does so by using S&P 500 options (SPX) listed on CBOE exchange as an input. VIX takes together all SPX call and put options and compares the changing demand and price between them.
 

Relationship between the VIX index and the markets

The VIX index generally tracks the S&P 500 index in an inverse manner. That is, if the stock markets (S&P 500) are turbulent and investor nervousness/fear increases, the same can be observed for the VIX index. On the other hand, if stock prices are on the rise, the VIX index generally declines or advances sideways.
 

Meet: VIX.f - tradable CFD futures instrument

Similar to other indices, the VIX is not tradable on its own and needs an investment vehicle to go with it. And that is what VIX.f is - a tradable continuous CFD futures instrument that behaves just like our other continuous CFD futures products. Its price is based on the underlying asset, which in this case is a specific VIX futures contract.

Continuous in this case means that before each futures contract expires, there is an automatic rollover of the position. This will result in selling of old contracts and the buying of additional nearest futures contracts. It is also important to note that since this is a CFD instrument, you don’t become the owner of VIX.f when trading it. You only speculate on its price.

How to trade VIX.f futures symbol

VIX.f CFD futures is a very versatile symbol that can help traders and investors in several different situations:
 

1. Buy/long in case of an expected increase in volatility or turbulence in the markets
2. Risk management or hedging vehicle for investors - through the inverse relationship of the VIX and the S&P 500
3. Option to open a short position in case of expecting a positive economic development in markets

Overall, it should be noted that VIX.f futures is not recommended to be traded in a buy and hold manner, but rather as a short-term investment.

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