VVIX (volatility of the VIX)

What it measures

Cboe describes the VVIX as a volatility of volatility measure: it represents the expected volatility of the 30-day forward price of the VIX, which is what drives the prices of nearby VIX options. It is calculated from a portfolio of liquid at- and out-of-the-money VIX options with the same method as the VIX. Cboe also publishes a term structure of VVIX values for different VIX option expirations.

Reading it next to the VIX

The VIX says how much the S&P 500 is expected to move; the VVIX says how uncertain that expectation is. Because the VIX itself is a volatility, the VVIX is typically a large number: a VVIX of 100 means the market prices the VIX's forward value to move with an annualised volatility of 100%, or about 100% × √(30/365) = 29% over a month. With the VIX at 20, a one-standard-deviation monthly move of the VIX would be roughly 20 × 0.29 = 5.7 points, under a normal approximation that fits volatility poorly.

• VIX low, VVIX high: calm markets but expensive protection against a volatility spike.
• VIX high, VVIX falling: volatility is elevated but the market expects it to settle.
• Both rising together: stress with growing uncertainty about how far it goes.

Uses and limits

• Traders of VIX options and futures use it to price tail hedges on volatility itself.
• It is related to vomma: option books with large vomma gain or lose most when volatility of volatility is realized.
• Cboe notes that VVIX portfolio prices have usually been at a premium to the volatility subsequently realized, a volatility risk premium on volatility itself.
• It says nothing directly about direction in the S&P 500.

In Senzoukria

Senzoukria does not display the VVIX. The closest session-level information it offers is the recorded history of the 25-delta skew and the implied volatility term structure on the GEX module's Volatility page, which show how the options market's pricing of the chosen underlying changes through the day.