Essential

Chicago Board Options Exchange (CBOE)

The largest US options exchange and creator of the VIX volatility index, a key barometer of market fear.

Definition

The Chicago Board Options Exchange is the largest options exchange in the United States. Founded in 1973, it pioneered listed options trading and created the VIX (Volatility Index), widely known as the "fear gauge." The VIX measures expected 30-day volatility in the S&P 500 and is used by forex traders as a risk sentiment indicator because spikes in VIX often coincide with safe-haven flows into USD, JPY, and CHF.

How It Works

Lists options on equities, indices, ETFs, and volatility products
Created the VIX in 1993 to measure implied volatility of S&P 500 options
VIX below 20 generally indicates calm markets; above 30 signals high fear
VIX futures and options allow traders to trade volatility directly

Trading Tips

Watch the VIX as a risk sentiment proxy for forex. Rising VIX often strengthens JPY and CHF

VIX tends to spike sharply during selloffs and decline slowly during rallies

A VIX above 30 typically coincides with wider forex spreads and more erratic price action

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