Volatility Articles

1. A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Normally the higher the volatility, the riskier the security becomes.

2. A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the options expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used.

In other words, volatility refers to the amount of uncertainty or risk about the size of changes in a security's value. A higher volatility means that a security's value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security's value does not fluctuate dramatically, but changes in value at a steady pace over a period of time.

One measure of the relative volatility of a particular stock to the market is its beta. A beta approximates the overall volatility of a security's returns against the returns of a relevant benchmark (usually the S&P 500 is used). For example, a stock with a beta value of 1.1 has historically moved 110% for every 100% move in the benchmark, based on price level. Conversely, a stock with a beta of .9 has historically moved 90% for every 100% move in the underlying index.

Volatility Soars

Volatility ETF options are relatively cheap in this rollercoaster market – profit from the downturn!

"Fear Gauges" Strike Again

The "Fear Gauges" marched higher yesterday, particularly volatility-linked exchange traded funds along with the CBOE Volatility Index. TVIX was the biggest gainer with 17%.

Market Volatility – Perceived or Real?

Market volatility is certainly not new, but how we deal with this emotionally makes a difference to trading performance and the bottom line – profit!

Shorting VXX

Information regarding shorting VXX and the difficulties encountered iPath, hypothetical historical prices and facts about VXX.

Volatility Index Futures

October 05, 2011

Volatility is the name of the game at the moment, with volatility index futures trading at extremely high levels. The investor needs to take certain measures, using options, to benefit from this situation!

Volatility Survival

September 29, 2011

Volatility Survival is certainly an investor’s major concern at this present time. However, certain strategies can be employed to survive and profit from this issue!

The VIX

September 27, 2011

The VIX is certainly at the forefront, particularly for investors, as it becomes embroiled with the European situation, as apparent from the VStoxx Index.

VIX Spikes

February 28, 2011

When the market begins falling, traders rush to hedge their investments. A popular market indicator used to hedge is to buy put options on the SPX causing significant effects, especially on the VIX.