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Brokers With Volatility Index

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James Barra

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James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

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Jemma Grist

Edited By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

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Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

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Updated

Oct 2, 2024

Brokers with volatility index products, such as the CBOE VIX 75, allow investors to measure risk or fear within a market and to capitalize on the resulting profit potential. Here, we list the best brokers with volatility indexes alongside detailed reviews. Find out how to trade volatility indices today.

What Is A Volatility Index?

Volatility indexes are real-time stock market indicators showing expected volatility over a certain period of time. Investors use them to gauge market sentiment and to capitalise on potential price swings.

You may have come across brokers with the Volatility 75 Index before (traded with the ticker symbol: VIX). The VIX is part of the Chicago Board Options Exchange (CBOE) and is the most established index for quantifying predictions of volatility. The index shows the implied volatility of the S&P 500 (SPX) basket of 500 weighted US stock options over the next 30-day period. Many of the top brokers with volatility index instruments offer this product.

If the value of the VIX index increases, it typically means that the S&P 500 is falling and vice versa. You can check out a live Volatility 75 (VIX) chart on TradingView now, to see how the market is moving today. We’ve also covered how to trade the Volatility 75 Index in detail here.

There are other volatility indexes available to trade too, including the EU Index (VSTOXX) which is the best volatility benchmark in Europe. Alternatively, India’s volatility gauge is based on the option price of the NIFTY Index. Other popular indices include the CBOE Gold (GVZ), the FTSE 100 VIX (VFTSE) and the NASDAQ 100 Volatility (VXN).

For those who prefer quieter markets, there’s also the S&P 500 Low Volatility Index, which measures the performance of the 100 least volatile stocks in the S&P 500. You can check out the historical data and methodology on the S&P Global website. We’ve also listed brokers with volatility index products on the S&P 500 above.

Synthetic indices are simulated markets that are not affected by world events and news. Nonetheless, they do act like real monetary markets and are based on a cryptographic random number generator. These indices are also audited by an independent third-party so that they cannot be manipulated.

Within the synthetic index market, there are three states to be aware of: Trend Higher (where prices rebound into a bullish direction), Trend Lower (where ‘up’ moves are sold off and the market moves into a bearish direction) and Sideways Range (where little movement occurs in either range). Traders should look out for brokers that allow them to trade range markets as well as bullish and bearish.

Pros

As volatility increases, the potential to make more money follows. Investing in volatility indices means capitalising on this. Brokers with volatility index instruments offer access to an interesting and less common asset, helping to diversify portfolios.

Brokers with volatility indexes are also incredibly useful when attempting to understanding whether markets have reached extreme positions, in either direction. With this being said, there are certain limitations that we’ve detailed below.

Cons

Arguably, a volatility index reveals little more than what is already accessible. Much is already shown in the past and current performance of the S&P 500 Index, for example. The daily changes in the VIX show what has happened and what is happening now. But, as all traders will know – past performance is not a guarantee of future trends. Therefore, there is the risk that brokers with volatility indexes offer limited additional insights.

Plus, daily fluctuations are a challenge to keep up with. The regular evaluations of a volatility index can be repetitive and breathless, relying upon this takes up a large amount of time, with the reward unpredictable.

A common occurrence in investing is when too much attention is paid to a short term number, rather than the bigger picture, which could be the case here. Day-to-day, there is limited benefit in monitoring the VIX, but on a month-to-month basis, you might gain much more.

Best Brokers With Volatility Indexes

Brokers with a volatility index are few and far between. So, we’ve detailed the top 4 forex brokers offering the Volatility 75 Index and other relevant indices.

Deriv – Using Synthetic Indices And The VIX

Deriv is one of the market-leading brokers with volatility index instruments, offering synthetic volatility indices alongside the VIX 75. It provides access to high leverage, tight spreads and a selection of two powerful platforms. There are 10 volatility index instruments available across margin trading, options or multipliers, allowing you to utilise almost any strategy.

Instruments

• Deriv’s volatility indices correspond to simulated markets, with constant volatilities of 10%, 25%, 50%, 75% and 100%. You can choose between different tick speeds, generated either every two seconds for indices 10, 25, 50, 75 and 100, or every one second for indices 10 (1s), 25 (1s), 50 (1s), 75 (1s) and 100 (1s)
• It also offers a range of other synthetic indices, including ‘crash’ and ‘boom’ (500 and 1000), step indices, and range break indices (100 and 200)
• Plus, you can trade and profit from range markets as well as trend higher and lower

Accounts

• With the Synthetic Indices EUR account, investors can trade contracts for difference (CFDs) on synthetic index instruments that replicate real-world movements. The account offers up to 1:1000 leverage, with fixed or variable spreads and market execution
• Deriv is also one of the few brokers with volatility index instruments that offers a free demo solution for clients to practice trading strategies. Traders enjoy unlimited virtual funds for as long as needed, which is ideal for beginners looking to try out these exciting markets

Platforms

• Positions are executed on the DTrader or MT5 platforms
• DTrader offers trading directly from charts with a real-time price feed for Rise (up) and Fall (down), among others. Arguably, there’s greater control with DTrader because traders can choose the volatility rate and the contract length. You can also open multiple index trades simultaneously, providing flexibility
• MT5 allows leveraged CFD investing using technical indicators and tools alongside a selection of plugins, signals and bots. There is a number of pending order limits, plus, you can program your own robots using DBot, the broker’s own programming tool
• To get started, register for a Synthetic Indices account and set up your platform password through the website, you can begin investing straight away

Fees & Payments

• Deriv clients enjoy zero commissions and no minimum deposit in the Synthetic Indices account. Depending on the payment method chosen, there may be a minimum deposit or withdrawal amount. Some methods may also involve a transaction fee
• The broker also offers low-pip spreads on CFDs and a useful calculator for margin and swaps on the website. These help you to estimate the costs of keeping positions open overnight

IC Markets – Using The VIX

• IC Markets offer two types of accounts, a Standard solution and a Raw Spread account (which is their market-leading option)
• There’s no commission on the Standard account, but there is a mark-up applied to the spread of 1 pip above the raw inter-bank rate from their liquidity providers. This is a competitive rate vs alternative brokers with volatility indexes.
• Raw Spread accounts show raw inter-bank spreads received from liquidity providers. There is a commission charge of $7 per standard round turn
• To open an account with IC Markets, simply click on the “Open a Live Account” link on their website and complete your application form
• Once your online application form has been approved by their client team, you will be emailed your account login details and password, and then you’re ready to go

Pepperstone – Using The VIX

• One of the best all-round brokers with volatility index products
• Pepperstone offers both demo and live accounts
• Demo accounts automatically expire after 30 days but can be changed to a live account
• There’s a selection of three platforms for volatility index trading: MT4, MT5 and cTrader
• They recommend an initial deposit of £500 to trade, but this is not a requirement
• To open a live account, just visit the homepage, select ‘Live Account’, then ‘Open a Live Trading Account’
• It will take about 10 minutes to complete the set-up process
• You’ll be prompted to complete an onboarding quiz and provide your account opening ID documents
• Once they have verified your documents, they’ll send through your login information

IFC Markets – Using The USVIX

• There are no fees to open an IFC Markets account
• Commission is charged for opening and closing positions on stock CFDs. This varies depending on the stock exchange – starting at 0.1% of the position volume
• You can only have one of each type of account, either: real or demo, one platform, account type (Beginner, Micro, Standard Fixed/Floating), currency, netting or hedged
• Opening an account is quick, easy and free. You just need to register to open an account using the broker’s website

Final Word

Brokers with volatility indexes provide traders with an asset class that is unrivalled by your traditional forex brokers. Therefore, they’re a popular option for those looking to branch out to new instruments.

When trading in a volatile market, there are a number of ways to stay ahead of the game. Sentiment plays a large part in many strategies for stock markets, so with this in mind, a volatility index is useful. With that being said, an index still has its limitations and is far from perfect. It is at the trader’s discretion to decide how much to rely on its insights.

FAQs

How Is The Volatility Index Calculated?

The CBOE Options Exchange (CBOE Options) calculates the VIX Index using standard SPX options and weekly SPX options. Standard SPX options expire on the third Friday of each month and weekly SPX options expire on all other Fridays. Only SPX options with more than 23 days and less than 37 days to the Friday SPX expiration are used. These are then weighted to yield a constant maturity 30-day measure of the expected volatility of the S&P 500 Index. Brokers with volatility index instruments may offer products on various major exchanges.

How Is Implied Volatility Different From Actual Volatility?

Rather than measuring realised or historical volatility of the S&P 500, the VIX projects its implied or expected volatility 30 days in the future. Implied volatility is a prediction only. It’s important to note brokers with volatility index products should have appropriate risk warnings on their website.

Why Is The Volatility Index Sometimes Referred To As The “Fear Gauge”?

The media and brokers with volatility index instruments often refer to the VIX as a “fear gauge” since it is a measure of investor sentiment. The VIX tends to rise as investors perceive a higher likelihood of prices declining, and so it is a good predictor of market-wide concern.

When Is A Good Time to Trade Volatility Index 75?

The best time to trade the Volatility Index 75 is when the price reacts to previous support or resistance levels. Results from research on the best time to trade Volatility 75 indicate that major trend reversals, range breakouts and price jumps happen around the 11:00 GMT and 23:00 GMT. We’ve listed some of the best brokers with volatility index assets in our guide above.