Finance scholar Robert E. Whaley published work arguing that market participants needed tools to hedge and trade changes in market volatility. His research helped explain VIX as a forward-looking measure (based on option prices) rather than just past price moves. This academic framing supported the idea that volatility could become a tradable asset class.
The Chicago Board Options Exchange (CBOE) announced a new “Market Volatility Index” to give traders a real-time measure of expected stock market volatility. The original index used S&P 100 (OEX) options’ implied volatility (options prices that reflect expected future swings). This launch created a standardized “fear gauge” that later made volatility products possible.
Cboe launched the VIX Index as an ongoing, widely disseminated benchmark for U.S. equity market volatility. Having a recognized, continuously published index made it easier for investors and researchers to talk about “volatility” as a measurable market quantity. This helped set the stage for later futures and options tied to the index.
Cboe replaced the original VIX calculation with a new methodology based on S&P 500 (SPX) options and a broader range of strike prices. The old, OEX-based version continued under the ticker VXO. This change made VIX more representative of the broader U.S. stock market and better aligned with modern volatility trading and hedging needs.
Cboe launched the Cboe Futures Exchange (CFE) and began trading VIX futures, creating a standardized way to take positions on future implied volatility. VIX futures were important because the VIX index itself is not directly “buyable,” but futures can track expectations about where the index may be at expiration. This was a major step in turning volatility from an indicator into a traded product.
Cboe began trading options on VIX, allowing investors to hedge or speculate on expected volatility with option payoffs (for example, limited-loss strategies using calls or puts). These contracts were cash-settled and European-style (exercisable only at expiration), designed specifically for index-based volatility exposure. VIX options broadened the volatility toolkit beyond futures and accelerated market participation.
Cboe expanded beyond the 30-day VIX by publishing a 3-month implied volatility measure for the S&P 500. This supported “term structure” analysis—how expected volatility changes across time horizons (near-term versus longer-term). These additional benchmarks helped traders and product issuers design more targeted volatility strategies.
After the introduction of VIX options and futures, trading activity increased sharply as more investors used volatility instruments for hedging and tactical positioning. Public company filings highlighted rapid growth in VIX options volume year-over-year in the mid-2000s, showing that the market was becoming more liquid and widely used. Higher liquidity made it easier for larger institutions to enter and for new related products to develop.
Lehman Brothers filed for Chapter 11 bankruptcy protection, a defining moment of the 2007–08 financial crisis. The collapse intensified uncertainty and contributed to extreme demand for insurance-like options protection. This environment helped demonstrate why exchange-traded volatility derivatives could be valuable hedging tools in systemic stress.
During the financial crisis, the VIX reached an intraday high of 89.53, reflecting extreme expected volatility priced into S&P 500 options. The spike highlighted the VIX’s role as a stress barometer and drew broader attention to volatility trading and hedging. This period helped expand interest in VIX futures and options as tools for managing tail risk (rare but severe moves).
The iPath S&P 500 VIX Short-Term Futures ETN (VXX) launched, offering investors exchange-traded exposure to a rolling position in near-term VIX futures. This helped move volatility trading beyond specialist derivatives desks by putting VIX-futures exposure into a security that could be bought and sold like a stock. The launch also encouraged more liquidity and ecosystem growth around VIX futures and options.
By the mid-2010s, VIX futures and VIX options were established as core instruments for trading and hedging expected S&P 500 volatility. Research literature treated these contracts as foundational exchange-traded volatility derivatives and analyzed features like term structure and option pricing behavior. This period marks the consolidation of volatility derivatives into a durable market segment rather than a niche experiment.
Growth of Volatility Derivatives: VIX, VIX Futures, and VIX Options (1993-2015)