The Cboe Volatility Index VIX is calculated in the following way.
According to Schaeffer's Investment Research the Cboe volatility index (VIX) is a well-known indicator of equities market volatility. It's derived using short-term S&P 500 option bid and ask prices. The expiry dates for these selections are divided into two time periods: 30 days after the current day and one month thereafter. The results of the short-term S&P 500 options were utilized in the computation. The VIX is calculated using a formula that considers the time until call and put options expire. The risk-free interest rate is multiplied by the two-week, or "near-term" strikes, to get at this value. The computations are redone during the following week. The 30-day value is calculated by adding the total variance of the first and second expirations together. While VIX isn't a direct indication of market volatility, it is regarded as a good risk proxy. It is calculated using premiums on ordinary SPX options that expire on the third Friday of each mon