Volatility of Volatility (VVIX) Surface Blowout
The Formal Definition
The extreme implied volatility spike and skew steepening that occurs in options on the CBOE Volatility Index (VIX options) as measured by the VVIX Index, indicating that market participants are aggressively bidding up options on volatility itself ahead of systemic market dislocations.
VVIX = CBOE Implied Volatility Index of VIX Options (Normal Range: 80 - 100 | Blowout > 130)
Cole Barrett's Reality Check
The Unvarnished Bottom Line"If the VIX is the market's fear gauge, the VVIX is the fear of the fear gauge. The VVIX measures the volatility of the VIX by looking at VIX options. When the VVIX blows out above 130 while the regular VIX is still sleeping at 16, it means institutional hedge funds are quietly buying deep out-of-the-money VIX calls. It is the ultimate early-warning indicator that a volatility storm is brewing."
Interactive Simulator: Test the Math
Real-World Example: Scenario Breakdown
Examining the real numbers for: Managing a systematic options-selling portfolio as the VVIX Index surges from 85 to 142 while the spot VIX sits at 15
| Execution Metric | VVIX-Informed Risk Manager | Spot-VIX Blind Premium Seller |
|---|---|---|
| Fee / Rate | $0.65/contract | $0.65/contract |
| Spread / Buffer | Noticed VVIX blew out past 140; recognized institutional demand for VIX calls was signaling an imminent volatility shock | Looked only at the spot VIX at 15; assumed market conditions were calm and expanded short options positions to maximize premium |
| Execution / Status | Cut short options position sizes by 60% and bought out-of-the-money VIX calls to hedge against an IV explosion | Ignored the surging VVIX; market suffered a sudden macro gap crash; VIX exploded from 15 to 35 in 48 hours |
| Total Cost / Result | Avoided catastrophic options blowout via early VVIX warning indicators | Blindsided by an unmodeled volatility-of-volatility explosion |
How Brokers Weaponize This Term
Monitor the VVIX/VIX Ratio. When VVIX trades above 125 while VIX remains below 18 (a wide divergence), do not sell naked options. Smart money is actively bidding up VIX options, which historically precedes sharp market pullbacks and volatility explosions.
Broker Evaluation Matrix
Cole Approves
Tastytrade: Integrates live VVIX, VIX, and SKEW indicators directly into charting interfaces, helping options traders track volatility-of-volatility shifts.
Read Audit →Cole Flags / Avoids
Basic Mobile Retail Apps: Omits the VVIX Index and volatility surface analytics, keeping retail options traders unaware of institutional volatility positioning.
View Trap Details →Frequently Asked Questions
What does a high VVIX mean?
A high VVIX indicates that the market expects the VIX itself to experience rapid, violent price swings in the near future, reflecting high uncertainty around market stability.
Can retail traders trade VVIX directly?
No. The VVIX is an un-tradeable benchmark index, but traders can trade the underlying volatility using VIX options, VIX futures, or volatility-linked exchange-traded products.