CBOE Russell 2000® Volatility Index (RVX)

The CBOE Russell 2000® Volatility Index is an indicator of the short-term (30-day) expectation of volatility in the stock market. It specifically calculates volatility for Russell 2000 options, or the small-cap portion of U.S. equity markets.

The Russell 2000 Index is a part of the Chicago Board Options Exchange (CBOE), the largest exchange for U.S. options, trading under the ticker RUT. It tracks the performance of the bottom 2,000 stocks out of the largest 3,000 in the United States, which tend to be smaller companies, whereas the Russell 1000 Index (RUI) tracks the top 1,000 stocks, which tend to be large multinational companies. It only follows stocks housed in the United States that are traded on the major stock exchanges: NYSE, NASDAQ, or AMEX. It is updated each year to reflect the latest stock standings.

RUT options have the following defining characteristics:

• In general, options can only be exercised on the expiration date, or European style. The exact expiration date is the third Friday of the month of expiration, and trading ceases at the end of business the Thursday prior.
• Strike prices are listed initially with a minimum interval of 2.5 points. If the strike price passes 200, the minimum interval is changed to 5 points.
• If an option is purchased within nine months of the expiration date, it must be paid for in full.
• Prices and quotes are transparent.
• RUT options are traded from 8:30 a.m. to 3:15 p.m. Central Time. This is because the CBOE is Chicago-based.

The Russell 2000 Volatility Index tracks the 30-day expectations of the volatility of the Russell 2000 option prices. The Russell 2000 Volatility Index operates under the ticker RVX. Due to its smaller-cap build, the RVX tends to trade at higher levels of volatility than its S&P 500 counterpart, VIX. It is traded in percentage points, and CBOE provides up-to-the-minute volatility estimates throughout the trading day.

The Russell 2000 Volatility Index is an indication of investor opinion and market direction of the Russell 2000 Index. It has the following characteristics:

• The expiration date is the Wednesday 30 days before the third Friday of the month following the month in which the option expires. The Volatility Index can trade up until the Tuesday prior to expiration, or the day immediately preceding the expiration date if there is a holiday.
• Any options purchased within nine months of expiration must be paid for in full.
• The Volatility Index trades on Central Time.

The short-term expectation of stock market volatility, as measured by the Russell 2000 Small-Cap Volatility Index, has been fairly subdued in recent years and has lightened since early 2016, with the latest bouts of significant volatility occurring in mid-2010 and late-2011, when fears stemming from a European sovereign debt crisis temporarily roiled global markets.