Volatility Indices

Volatility indices distill the vol surface into a single number, making it easy to track market-wide implied volatility over time.

Definition

A vol index is a calculated measure of implied volatility across the options market, typically representing 30-day expected volatility.

Key Points

• Vol indices track aggregate implied volatility, not any single option
• They're forward-looking (like IV), not backward-looking (like realized vol)
• Different indices use different methodologies, but aim for the same thing

Major Vol Indices

VIX (CBOE Volatility Index)

The most famous volatility index. Measures 30-day implied volatility of S&P 500 options.

Attribute	Detail
Underlying	S&P 500 (SPX)
Calculation	Weighted average of OTM option prices
Range	Typically 10-30, spikes to 80+ in crises
Live chart	TradingView VIX

Why it matters: The VIX is called the "fear gauge." When stocks sell off, VIX spikes. Major funds and institutions use VIX levels to make allocation decisions.

VIX Level

Market Interpretation

Historical Context

< 15

Calm, complacent

Bull markets, low fear

15-20

Normal

Average conditions

20-30

Elevated concern

Corrections, uncertainty

30-50

High fear

Bear markets, major events

> 50

Extreme panic

2008, 2020, rare events

BVIV & EVIV (Volmex Implied Volatility Indices)

Volmex publishes crypto volatility indices: BVIV (Bitcoin Volmex Implied Volatility) and EVIV (Ethereum Volmex Implied Volatility). Both measure the constant, forward-looking 30-day expected volatility of their respective assets.

Attribute	Detail
Indices	BVIV (BTC) and EVIV (ETH)
Calculation	Model-free methodology similar to VIX, aggregating OTM option prices
Tradeable	Perpetual futures on Bitfinex and gTrade
Bloomberg	Available on Bloomberg Terminal (tickers: BVIV, EVIV-VOL) (announcement)
Charts	Volmex Charts Dashboard
Docs	Volmex Documentation

What makes Volmex notable:

• Bloomberg Terminal distribution. BVIV and EVIV are available alongside traditional indices like VIX, reaching 350,000+ professional subscribers. This gives crypto vol data institutional-grade visibility.
• Tradeable as perpetuals. You can go long or short BVIV/EVIV via perpetual futures on Bitfinex and gTrade, providing direct vol exposure without constructing options positions.
• Additional indices. Beyond implied vol, Volmex publishes realized volatility indices and spot-volatility correlation indices, giving a fuller picture of the vol landscape.
• Broad integrations. Available on TradingView, CoinMarketCap, The Block, and LSEG (Refinitiv).

BVIV Level

Market Interpretation

Historical Context

< 45

Low vol (for crypto)

Consolidation, range-bound

45-60

Normal

Typical BTC trading

60-80

Elevated

Trending markets, events

80-100

High fear/excitement

Major moves, liquidations

> 100

Extreme

Black swan events

EVIV (ETH) typically runs 10-20% higher than BVIV (BTC) due to ETH's higher beta. You can track both on the Volmex Charts Dashboard.

DVOL (Deribit Volatility Index)

DVOL is published by Deribit and measures 30-day implied volatility derived from options on the Deribit exchange.

Attribute	Detail
Underlying	BTC and ETH options on Deribit
Calculation	Variance swap replication (same core approach as VIX) with 5% delta cutoff and 240-second EMA smoothing
Range	Typically 40-80, can exceed 150 in crises
Tradeable	DVOL futures (cash-settled in USDC, launched March 2023)
Live chart	Deribit DVOL

DVOL is a useful reference for Deribit-specific order book conditions. Since Deribit is the dominant crypto options venue, DVOL closely tracks broader crypto vol. However, it reflects only a single exchange's data.

Comparing Crypto Vol Indices

	BVIV/EVIV	DVOL
Data distribution	Bloomberg, TradingView, CoinMarketCap, LSEG	Deribit website
Trading venue	Perps on Bitfinex, gTrade	DVOL futures on Deribit
Scope	Implied, realized, and correlation indices	Implied volatility only
Data source	Leading options exchanges	Deribit order book only

Both indices use VIX-style variance swap replication at their core. The main differences are in distribution, tradeability, and data sourcing.

How Vol Indices Are Calculated

Vol indices like VIX, BVIV/EVIV, and DVOL aggregate OTM option prices across the entire strike range. Try adjusting the vol level and skew to see how the index responds:

Vol Index Calculation (Variance Swap Replication)

Index: 45.0%

Vol indices aggregate OTM option prices weighted by 1/K² across all strikes. Adjust the sliders to see how vol level, skew, and the delta cutoff affect the index.

Vol Level: 55%

Low (30%)High (100%)

Put Skew: +5%

Flat (0)Steep (+15%)

Delta Cutoff: 5%

None (0%)Strict (10%)

Strike	3P excluded	10P	25P	ATM excluded	25C	10C	3C excluded
K ($)	80k	85k	93k	100k	107k	115k	120k
Δ (%)	3%	10%	25%	50%	25%	10%	3%
IV (%)	61.7%	60.0%	57.3%	55.0%	54.3%	53.5%	53.0%
Price ($)	734	1475	4004	8594	4121	1641	890
Weight	—	138%	116%	—	87%	76%	—

Contribution to Index

3P

10P

25P

ATM

25C

10C

3C

Key insight: OTM puts (with skew premium) contribute heavily to the index due to their 1/K² weighting. The delta cutoff filters out illiquid far-OTM strikes where wide bid-ask spreads could distort the calculation. Currently filtering 3 strike(s) below 5% delta.

These indices use a model-free approach based on variance swap replication (Carr-Madan decomposition). The core formula doesn't rely on Black-Scholes:

Vol Index Formula (Variance Swap Replication)

σ² = (2/T) × Σ (ΔK/K²) × e^rT × Q(K) - (1/T) × [F/K₀ - 1]²

Hover to explore:

Hover over a variable above to see its meaning.

Key Insight

This formula integrates OTM option values across all strikes, weighted by 1/K². The [F/K₀ - 1]² correction term adjusts for the forward price not landing exactly on a listed strike. More expensive OTM options (both puts and calls) mean a higher vol index.

The full calculation:

1. Select two expiries bracketing 30 days (near-term and next-term)
2. Calculate the forward price for each expiry using put-call parity
3. Filter strikes to OTM options only. DVOL uses a 5% delta cutoff; VIX uses a "two consecutive zero-bid" rule
4. Apply the variance formula above for each expiry
5. Interpolate between the two variances to target exactly 30 days using time-weighted linear interpolation
6. Take the square root and multiply by 100 to get the index level

DVOL adds a 240-second EMA (exponential moving average) to smooth the raw calculation, which updates every second.

Using Vol Indices

As a Market Indicator

Vol indices give you a quick read on market sentiment. Track BVIV on TradingView or the Volmex Charts Dashboard for real-time signals:

Signal	What to Watch	Interpretation
Spike	VIX > 25 or BVIV > 70	Fear entering, expect volatility
Crush	Vol index drops 20%+	Uncertainty resolved, calm returning
Divergence	Vol rising while spot flat	Market pricing a move that hasn't happened
Persistence	Vol stays elevated for weeks	Regime change, new normal

For Timing

Some traders use vol indices for timing:

• Buy when VIX > 30: Historically good entry points for equities
• Sell when VIX < 15: Market may be complacent
• Fade BVIV spikes > 100: Crypto vol tends to mean-revert quickly

Trading Vol Directly

VIX has liquid futures and options markets for direct vol trading. In crypto, both Volmex (via BVIV/EVIV perpetual futures on Bitfinex) and Deribit (via DVOL futures) offer ways to take direct vol exposure without constructing options positions.

Vol Index Futures as Vega Hedges

One of the most practical uses of tradeable vol indices is as a vega dampener. If you're running a portfolio of short options (collecting premium), you carry negative vega exposure: when IV rises, your positions lose value. A long position in vol index futures (BVIV perps, EVIV perps, or DVOL futures) provides positive vega that offsets some of that risk.

This is simpler than constructing vega-neutral spreads with options. Instead of buying protective straddles or adjusting across multiple strikes and expiries, you add a single long vol index position sized to your vega exposure.

Vega Hedge Scenario: Vol Index Futures as a Dampener

A portfolio of short options carries negative vega. When IV rises, the portfolio loses money. A long position in vol index futures (BVIV, EVIV, or DVOL) offsets some of that vega exposure.

Portfolio Vega: $-5.0k/pt

Heavy short (-$10k)Light short (-$1k)

Hedge Ratio: 50%

No hedge (0%)Full hedge (100%)

Unhedged P&L

$-100.0k

Hedged P&L

$-50.0k

Dampening

50%

--- Unhedged portfolio--- Portfolio + vol index hedge- - Vol index P&L only

How to size the hedge:

1. Calculate your portfolio's net vega (the dollar P&L per 1-point IV move)
2. Determine how much vega dampening you want (full hedge vs. partial)
3. Size your vol index futures position so its notional vega matches your target offset

For example, if your portfolio has -5,000 vega and you want to hedge 60% of it, you need +3,000 of vega exposure via vol index futures.

Practical considerations:

Factor	Detail
Basis risk	Vol index futures track 30-day ATM-weighted IV. Your portfolio's vega profile (across strikes and expiries) won't match exactly.
Roll cost	Fixed-expiry futures (like DVOL futures) need to be rolled. Perpetuals (like BVIV/EVIV perps) have funding rates instead.
Correlation	The hedge works best when your portfolio IV moves in line with the index. Single-name or far-OTM positions may diverge.
Partial hedging	Most desks don't fully hedge vega. A 40-70% dampening ratio reduces tail risk while preserving some vol premium capture.

Roadmap

Vol index-based vega hedging is on our roadmap. We're exploring integration with Volmex BVIV/EVIV perpetuals and DVOL futures to enable one-click vega dampening directly from your portfolio view.

VIX Term Structure

VIX itself has term structure! VIX futures for different expiries trade at different prices:

Term Structure	What It Means
Contango	VIX futures > spot VIX
Backwardation	VIX futures < spot VIX

Limitations

Vol indices are useful but have caveats:

Limitation	Detail
30-day only	Doesn't capture term structure nuances
ATM-weighted	Skew information somewhat compressed
Lagging	Updates with market prices, not predictive
Single-exchange risk	Indices sourced from one exchange (like DVOL) reflect only that venue's book

Historical Context

Event	VIX Peak	Crypto Vol Peak
2008 Financial Crisis	80+	N/A
March 2020 (COVID)	82	180+
Luna/UST Collapse (May 2022)	35	120+
FTX Collapse (Nov 2022)	30	100+

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Related:

• Volmex Finance - Crypto volatility indices (BVIV & EVIV)
• Volmex Charts - Live BVIV/EVIV dashboard
• Volmex Docs - Index methodology and documentation
• Vol Surface - What the indices summarize
• Vol Regimes - Market states defined by vol levels
• Reading Volatility Course - Full course on reading vol