ETF Trends
ETF Trends

As oil prices have fallen, many investors with exposure to energy companies have wisely kept an eye on VIX. But there is another volatility benchmark – one more suited to energy equity investments – which investors should also watch carefully: VXXLE.

VXXLE is the ticker for the CBOE Energy Sector ETF Volatility Index. This index has same methodology as VIX. However, instead of tracking S&P 500 options, it is based on options tied to the Energy Select Sector SPDR® Fund, a popular ETF known by its ticker, XLE.

VXXLE measures the 30-day implied volatility of XLE and by extension, the index it follows, the S&P Energy Select Sector Index. Just as VIX is inversely correlated to the S&P 500, VXXLE is inversely correlated to XLE, as the chart below shows (3-year correlation = -0.66).

Even though CBOE does not yet offer derivatives based on VXXLE, this index still has great value as a benchmark, particularly when coupled with other related information. As an example, some analysts compare the changing value of a volatility index with the price-to-earnings ratio of the companies in the underlying index.


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