Cboe Nasdaq Volatility Index (VXN)

What Is Cboe Nasdaq Volatility Index (VXN)?

The Cboe Nasdaq Volatility Index (VXN) is a measure of market expectations of 30-day volatility for the Nasdaq 100 index, as implied by the prices of options listed on this index. The Cboe Global Markets (Cboe) sent off the VXN in January 2001.

Grasping Cboe Nasdaq Volatility Index (VXN)

The VXN index is a widely watched measure of market sentiment and volatility for the Nasdaq-100, which incorporates the best 100 U.S. also, international non-financial securities by market capitalization listed on the Nasdaq. The VXN is quoted in percentage terms, just like its better-known partner the Cboe Volatility Index (VIX), which measures 30-day implied volatility for the S&P 500 index.

The Cboe Nasdaq Volatility Index was presented in 2001 as the [dot-com bubble](/web bubble) in technology stocks was emptying. Cboe developed the VXN in view of the enormous divergence between the volatility found in the Nasdaq market compared to the more extensive U.S. equity market from mid 1999 forward.

For sure, the Nasdaq soared 157% in a 15-month period from January 1999 to its pinnacle level of 5,048 on March 10, 2000, before plunging 52% to below 2,500 by December 20, 2000. The S&P 500, by comparison, just acquired 21% from January 1999 to its March 24, 2000 pinnacle, and afterward declined down 18% toward the finish of 2000.

The higher the VXN level, the greater the expectation for Nasdaq-100 volatility. Like the VIX, the VXN works best as a "dread measure" or indicator of market apprehension about the technology sector.

Since its presentation, the highest level came to by the VXN was 71.72 in September 2001, brought on by the 9/11 attack. Other eminent pinnacles incorporate 79.16 in October 2008, at the level of the global financial crisis, and 80.08 in March 2020, as the world reeled under the global economic shutdown. The 2020 crisis induced VXN spike proved to be brief as the check returned to levels during the 30s. On the flip side , the most reduced level was 10.31 in March 2017.

VXN Methodology and Interpretation

The methodology utilized by the Cboe to compute the VXN — whose value it scatters ceaselessly during trading hours — is indistinguishable from that utilized for the VIX. VXN parts are close term (with somewhere around multi week to expiration) put and call options, and next-term options in the first and second Nasdaq-100 contract months (options with over 23 days and under 37 days to expiration). The chose options are out-of-the-cash Nasdaq-100 puts and calls focused on an at-the-cash strike price.

Movement in the VXN addresses the level of implied volatility from the prices of listed options on the Nasdaq 100 index. Expansions in the VXN and positive movement addresses higher variances in the underlying securities' price from their average. This normally happens with vulnerability. Diminishes in the VXN and negative movement addresses lower volatility and a greater propensity at costs to trade in a more tight reach. The VXN is generally tracked with the Nasdaq 100 to figure out volatility comparable to positive or negative movements in the prices of the index.

Features

• The VXN, similar to the VIX, is computed utilizing the implied volatilities of options listed on the Nasdaq 100 index and works best as a "dread measure" or indicator of market apprehension about the technology sector.
• The VXN was made as a partner to the VIX, which measures S&P 500 volatility since the tech-weighty Nasdaq frequently wanders from the more extensive market.
• The Cboe Nasdaq Volatility Index (VXN) is a real-time market index addressing the market's expectations for volatility in the Nasdaq 100 index over the approaching 30 days.