The VIX volatility index is a gauge of the fear and greed that market participants are experiencing and can be used as a tool to help guide binary options traders as it relates to the S&P 500 index. The VIX is a measure of the implied volatility of the at the money calls and puts of the S&P 500 index, and reflect the level of premium that needs to be paid to purchase at the money options.
Implied volatility is an estimate of the distance the S&P 500 index will move over a certain period on an annualized basis. For example, a VIX reading of 13.98% means that market participants believe that over the next 30 day period, the S&P 500 index will move 13.98% when annualized, or 1.17% over the next 30 days. Continue reading "Using The VIX As a Fear Gauge In Binary Options Trading"