Cyprus-headquartered brokerage easyMarkets today announced that it launched a CFD on the CBOE Volatility Index to its trading platform.
Through easyMarkets, traders may now trade volatility as a Contract for Difference (CFD), which provides direct exposure to the fast-moving index. CFDs on the CBOE Volatility Index are offered under the ticker symbol Fear (VXX).
The Chicago Board Options Exchange (CBOE) Volatility Index, also known as the VIX or S&P 500 fear index, captures the market’s expectations of near-term volatility conveyed through S&P 500 Index option prices.
As a mean-reverting indicator, the VIX trades on a scale of 1-100, where 20 is considered the historical average. VIX readings below that level generally point to below-normal volatility in the market, whereas readings above 20 signal higher volatility.
The VIX is commonly referred to as the “fear index” for its ability to capture market uncertainty.
Why Trade The Fear Index?
- The easyMarkets Fear Index (VXX) allows traders the possibility to profit from volatility in the US stock market. (Experienced traders know that volatility is a double edge sword and losses may also be incurred).
- Fear allows traders to gauge the underlying direction of the market, since the CBOE Volatility Index trades in the opposite direction of the S&P 500 about 75-80% of the time.
- Accessing volatility as an asset through the easyMarkets Fear Index (VXX) CFD allows traders to potentially profit on falling market conditions. A monetary policy statement, economic data release or political event that trigger sharp moves might be prime opportunities to trade the volatility index as a CFD.
The index has experienced several spikes throughout the past year. The New Year selloff, crashing oil prices, Brexit and the US presidential election all triggered intense bouts of volatility that translated into lower US stock prices with a higher volatility reading.