Amex Volatility Index
What is the Amex Volatility Index?
The Amex Volatility Index is a measure of the implied volatility of a hypothetical at-the-money QQQQ (NASDAQ 100 Index) option, expressed as an annual standard deviation of returns. It is used as a measure of trader sentiment regarding the future volatility of the index.
Where have you heard about the Amex Volatility Index?
Although the index is over 15 years old, you're unlikely to have heard about it unless you invest heavily in options. The index rarely appears outside academic literature.
What you need to know about the Amex Volatility Index.
It is important to note that the Amex Volatility Index is not a measure of historical or statistical volatility, but instead a measure of the implied volatility of a wide range of options. It reflects investors' best predictions of short-term market volatility, or risk.
If implied volatility is high, the premium on options will be high and vice versa. In general, volatility starts to rise in times of financial stress and fall as investors become more complacent.
The index is measured in terms of the standard deviation of returns. A value of 25 suggests to investors that in the coming 12 months, the NASDAQ 100 could be as high as 25% above its current value or 25% lower.
The index is refreshed every trading day between the hours or 9:30 am and 4:15 pm Eastern Time under the stock ticker QQV.