Volatility is the relative rate at which the price of a security or contract moves up and down. Volatility is found by calculating the annualized standard deviation of daily change in price.
A volatile market, contract or security is one whose price tends to fluctuate sharply and regularly.
Volatility can be used in various manners to measure market activity. Traders use volatility indicators to make decisions about changes in market direction.
The VIX is a volatility index developed by the Chicago Board Options Exchange in 1993 to measure investor sentiment and market volatility. It is often referred to as a "fear guage."
The CBOE has introduced futures and options on the VIX.
- ↑ Glossary. U.S. Commodity Futures Trading Commission.
- ↑ Glossary. CME.
- ↑ Market volatility explained. Fortune.
- ↑ Volatility. Online Trading Concepts.