Specifically, if the VVIX rises, this means that market participants are expecting strong fluctuations in volatility - a double uncertainty. This occurs particularly frequently in phases in which rapid and sharp price movements are expected on the stock market.<\/p>\n\n\n\n
The Chicago Board Options Exchange (CBOE), which calculates both the VIX and the VVIX, uses option prices on the VIX itself to determine the VVIX. The stronger the demand for these VIX options, the higher the VVIX.<\/p>\n\n\n\n
Podcast tip: VVIX - The fear barometer of the markets<\/a><\/p>\n\n\n\n A high VVIX value signals that market participants are expecting sharp fluctuations in volatility - and this is often a harbinger of dramatic market movements or the end of a downward trend. This was particularly noticeable during the COVID-19 pandemic: On March 16, 2020, the VVIX reached its highest level to date at 209 points - an extreme expression of the market panic at the time.<\/p>\n\n\n\n In normal market phases, the VVIX usually moves between 75 and 95 points. Values above 120 already indicate above-average unrest, while values above 150 or even 200 represent rare extreme states. At these times, many shares are already close to their local lows. The market is then not only pricing in risks, but also the possibility of massive counter-movements - important information for traders.<\/p>\n\n\n\n Particularly strong swings in the VVIX are usually associated with intense market movements - often also with sudden recoveries after sharp corrections. This makes the VVIX a helpful tool for identifying possible turning points in the market. It is striking that while highs in the VVIX are considered strong signals, lows are less meaningful.<\/p>\n\n\n\n A sharp rise in the VVIX - following an abrupt price slump in the S&P 500, for example - indicates a high level of hedging activity with VIX options. If many market participants seek protection at the same time, this reflects a tense market situation that could soon unravel.<\/p>\n\n\n\n Although the VVIX cannot be traded directly, its information value can be used profitably in several strategies. Here are some tried and tested approaches:<\/p>\n\n\n\n 1. short puts on individual shares<\/p>\n\n\n\n A high VVIX often goes hand in hand with a sharp fall in share prices. If you are planning to buy a particular share anyway, you can use a so-called Cash Secured Put<\/a> sell. This involves committing to buy the share at a predetermined price - and receiving an attractive premium in return because the volatility is high. If the price rises, the option expires and the premium remains as a profit. If the price continues to fall, you receive the share at the agreed price - often still cheaper than the average of the last few weeks.<\/p>\n\n\n\n 2. short puts on the S&P 500<\/p>\n\n\n\n To avoid the risk of individual companies, the broad market can also be traded via SPX options or ETFs such as SPY. Selling puts on the overall market when the VVIX is high offers a favorable risk\/reward ratio, especially when a low is looming.<\/p>\n\n\n\n 3. short calls on the VIX<\/p>\n\n\n\n When the VVIX is very high, the VIX is usually also high. A fall is likely - especially if the market tends to calm down. The Sale of call options<\/a> on the VIX is one way of betting on this normalization. Important: This strategy should always be hedged with a long call in order to limit the risk.<\/p>\n\n\n\n 4. long calls on the S&P 500<\/p>\n\n\n\nWhat does a high VVIX mean?<\/h2>\n\n\n\n
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Why are particularly high values relevant?<\/h2>\n\n\n\n
Strategies for high VVIX<\/h2>\n\n\n\n