VIX Index Data: How to Use Market Volatility for Smarter Trading & Portfolio Protection

If you are into trading at any level, you know it: no feeling is better than observing the market sentiment and knowing exactly what to do next.

Back in the late ‘80s, Professors Brenner and Galai laid the Sigma Index (SI), the theoretical foundation to measure the expected volatility of the stock market for the next 30 days. By 1993, the Chicago Board Options Exchange (CBOE) refined its calculation with Professor Whaley of Duke University, finally announcing the birth of the CBOE Volatility Index (VIX).

Ever since then, VIX fluctuations have mirrored the major historical events in international macroeconomy and politics:

• On 24 October 2008, one month after Lehman Brother’s bankruptcy, the VIX rocketed to 89.53, recording its maximum record ever;
• Right after the 2008 crisis peak, all of the other 4 highest levels of VIX ever were recorded in March 2020, with the outburst of the Covid-19 pandemic in the USA;
• Notwithstanding widespread geopolitical instability and US Presidential elections, the VIX during 2024 was generally low - except for recording the biggest percentage spike in December.

How does this resonate with your current investment decisions?

We created a quick guide to the CBOE volatility index, and how our daily updated dataset can change your financial future.

1. The CBOE VIX: how it works

Let’s take a step back.

The CBOE Volatility Index (VIX) was officially announced in 1993, offering a refined tool to forecast the market’s volatility during the 30 following days. However, as also showcased in our dataset, rough calculations for its values were launched in 1990.

Often expressed in percentage terms, it has an inverse relationship to the S&P 500 value:

• If the VIX value rises, the S&P 500 value decreases;
• If the VIX value decreases, the S&P 500 value rises and stays stable.

The VIX has imposed itself as the benchmark to evaluate the stress within the American stock market, with values under 20 usually indicating a relaxed environment. That’s how it has gained the nickname “fear and greed index”.

As the existent volatility cannot be known beforehand, the CBOE Volatility Index is used by finance professionals in combination with historical support analyses and market resistance lines (source: IG Bank). What you may not know, however, is that you can use it to:

• Inform your decisions on other positions;
• Prevent stock losses during declining periods;
• Speculate on the market volatility itself.

2. The CBOE Volatility Index: how professionals exploit it

Many investors use the CBOE Volatility Index most directly, as a gauge of market sentiment to adjust their stock or bond positions. Rather intuitively, using the VIX to assess market sentiment can facilitate risk assessment and strategic allocation to different products. For instance:

• Low VIX levels may lead to favor stocks and equities;
• High VIX - especially if during a sustained period - would point towards defensive assets (like bonds or gold).

Investors and traders also speculate on market swings by directly levereging VIX-related products - such as futures and options. Put simply, this means that instead of just using the index as a guide for managing your portfolio, you can take advantage of volatility itself, profiting from market fluctuations.

In an in-depth analysis for e-Toro, popular investor Marie Amélie Biette offered a clear bullet-point list about how to use data on VIX as a defensive strategy:

1. Hedging to counterbalance market declines, holding VIX futures or options to prevent portfolio losses during market declines;
2. Dampen the impact of unforeseen events, mostly linked to major geopolitical events;
3. Preserving an upside potential even during violent market fluctuations, especially for diversified portfolios.

The CBOE Volatility Index can also be traded directly. Investopedia underlined that most speculation on it is linked to buying ETFs and ETNs, with the caveat to remember that their behavior may sometimes differ substantially from volatility expectations. One of the most aggressive (and risky) strategies consists in shorting the VIX, which gained popularity before the Volmageddon crash on February 5th, 2018 (source: Bloomberg).

The next paragraphs shed light on the features of our dataset, and the specific usages different professionals can make of it.

3. Our dataset features

DataHub has created the open-source dataset based on data directly coming from CBOE to provide professionals with a complete and clear source to use daily. We prioritized:

• Usability: the VIX dataset focuses on four parameters only, avoiding redundancy and allowing for first-glance insights about the current market’s sentiment;
• Actionability: the dataset is available in both standard CSV and JSON formats, making it extremely easy to integrate your own pipelines and directly inform your investment decisions;
• Simultaneously: the VIX data is updated daily, reflecting the stock markets’ dynamic character and meeting investors’ necessity to always be updated on the latest fluctuations.

As you may imagine, DataHub.io is really proud to be able to provide the VIX dataset to our users, because we know how awareness about the markets’ sentiment can make the difference in revenue maximization.

4. Who can exploit VIX data (and how)

Data on the CBOE Volatility Index don’t exclusively benefit finance companies, but individuals too. As we have seen before, it can be used to inform decisions both on a large scale and for smaller investments, making it a crucial reference point for anyone dealing with stock markets.

Based on your position and interests, you could exploit our dataset in different ways:

• Traders and investors use the VIX index to understand the market’s sentiment, thus informing their strategies with more complete information.

  • Identify windows of short-term profit generation
  • Speculating on violent swings in the market
  • Evaluate the risk and allocate resources to their portfolio

• Financial analysts mainly use the VIX to calculate the Value at Risk (VaR).

  • Individuate crisis or recovery periods
  • Draft reports for investors and companies
  • Identify hedging strategies

• Hedge fund managers base both their capital allocation and portfolio protection on the VIX trends, exploiting its implications.

  • Specialize in volatility-based strategies to generate high profits
  • Risk management, reducing the leverage, and increasing liquidity
  • Conduct dynamic allocations of the portfolio assets

• Journalists and researchers can explore VIX data to create more compelling narratives and individuate new causal relationships on the stock market sentiment.

  • Individuate trends and link them to political events
  • Forecast crisis periods to monitor the stock market more closely
  • Delve into the investors’ psychology

It is no mystery: the CBOE Volatility Index dataset is the best tool to always be on top of stock market fluctuations, adding depth to financial investments on different layers. DataHub.io thus offers exactly what traders and investors need: a comprehensive tool to gather immediately profitable information.

5. Recap table

📥 Explore our dataset, updated daily on DataHub.io, available in CSV and JSON formats → Download now

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