Oil Price Volatility Index Tied to Options On Oil ETF

July 16th at 12:00pm by Tom Lydon

Oil and related exchange traded funds (ETFs) have been volatile lately, so it stands to reason that there’s now an index that allows investors to track just that: the price volatility.

The Chicago Board Options Exchange (CBOE) unveiled the Crude Oil Volatility Index (VIX) yesterday, just in time for the commodity’s largest one-day price drop in 17 years.

The index is tied to options of the United States Oil Fund (USO), which holds oil futures. If the index surges, it generally signals an increase in prices, says Tennille Tracy for the Wall Street Journal. However, not always: Tuesday’s dramatic drop in oil prices sent the index higher by 7.7%. VIX tends to move inversely to the stock market.

USO is up 55% year-to-date.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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