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Expand chart
Data: Money.net; Chart: Axios Visuals

Credit Suisse announced the last day of trading for volatility-related security XIV would be Feb. 20, reports CNBC. Trading was halted Tuesday morning after the security plunged 85% in aftermarket hours.

Why it matters: Near-record volatility can have implications far beyond what happens to individual stocks, wiping out investments that had been viewed as safe just days ago.

What is implied volatility?

Implied volatility (IV) is a forward-looking, subjective tool that measures the expected variations in the price of a security. IV generally increases when investors believe a security's price will fall over time and decreases when the price is expected to rise.

IV is an estimate of future prices that is based on probability, meaning that there is no guarantee a security's price will follow a predicted outcome. Its utility stems from its correlation with market opinion, which has a direct impact on how options are priced. It's also important to note that IV does not predict the direction of a price fluctuation. High volatility indicates a large price swing, but does not indicate whether that swing will be up, down or both.

What is the VIX?

The Chicago Board Options Exchange (CBOE) introduced the VIX in 1993 as a measure of the 30-day implied volatility of eight S&P 100 options. Today, the VIX is a computed index that aggregates the volatility of options prices on the S&P 500, and is widely considered "the premier benchmark for U.S. stock market volatility," or "investor fear gauge," according to CBOE.

The VIX began offering futures contracts in 2004, allowing investors to bet on the expected volatility of the S&P over the next 30 days. VIX values greater than 30 are generally associated with high market volatility, while values lower than 20 tend to indicate a calmer market.

What is its impact on the market?

Per Axios' Dan Primack, the VIX volatility index yesterday spiked in a way we've only seen three other times since it was created in 1993:

  • 1999 dotcom crash
  • 2009 credit crisis
  • 2011 fears over debt ceiling vote

... and then it went even higher in the aftermarket. Several exchange-traded notes inversely related to the VIX, including XIV, have experienced a free fall as volatility spikes. Some fear that Credit Suisse and other volatility-related issuers' move to liquidate their funds will further drive up the VIX and trigger another big equity sell-off.

Go deeper

Trump set to appear at Pennsylvania GOP hearing on voter fraud claims

President Trumpat the White House on Tuesday. Photo: Chip Somodevilla/Getty Images

President Trump is due to join his personal lawyer Rudy Giuliani in Gettysburg, Pennsylvania, Wednesday at a Republican-led state Senate Majority Policy Committee hearing to discuss alleged election irregularities.

Why it matters: This would be his first trip outside of the DMV since Election Day and comes shortly after GSA ascertained the results, formally signing off on a transition to President-elect Biden.

Scoop: Trump tells confidants he plans to pardon Michael Flynn

Photo: Alex Wroblewski/Getty Images

President Trump has told confidants he plans to pardon his former national security adviser Michael Flynn, who pleaded guilty in December 2017 to lying to the FBI about his Russian contacts, two sources with direct knowledge of the discussions tell Axios.

Behind the scenes: Sources with direct knowledge of the discussions said Flynn will be part of a series of pardons that Trump issues between now and when he leaves office.

Erica Pandey, author of @Work
10 hours ago - World

Remote work shakes up geopolitics

Illustration: Eniola Odetunde/Axios

The global adoption of remote work may leave the rising powers in the East behind.

The big picture: Despite India's and China's economic might, these countries have far fewer remote jobs than the U.S. or Europe. That's affecting the emerging economies' resilience amid the pandemic.