Brokers With Volatility Index
Volatility indices like the Chicago Board Options Exchange’s VIX 75 offer traders of all stripes the opportunity to profit from fear or risk in the financial markets. This 2024 guide will provide a rundown of how to choose brokers with volatility index trading in the United Kingdom, along with useful information on how they work, how to get started, and beginner-friendly investing tips and strategies.
Brokers With Volatility Index Trading
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Founded in 1974, IG is part of IG Group Holdings Plc, a publicly traded (LSE: IGG) brokerage. The brand offers spread betting, CFD and forex trading across an almost unrivalled selection of 17,000+ markets, with a range of user-friendly platforms and investing apps. For 50 years, IG has maintained its position as an industry leader, excelling in all key areas for traders.
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Founded in 2002 in Poland, XTB now serves more than 1 million clients. The forex and CFD broker combines a heavily regulated trading environment with an extensive selection of 6400+ assets and a commitment to trader satisfaction, featuring an intuitive in-house platform with superb tools to support aspiring traders.
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Established in 1989, CMC Markets is a respected broker listed on the London Stock Exchange and authorized by several tier-one regulators, including the FCA, ASIC and CIRO. More than 1 million traders from around the world have signed up with the multi-award winning brokerage.
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AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for trading, from CFDs to AvaOptions and now AvaFutures, alongside a comprehensive education center and multilingual customer support.
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IC Markets is a globally recognized forex and CFD broker known for its excellent pricing, comprehensive range of trading instruments, and premium trading technology. Founded in 2007 and headquartered in Australia, the brokerage is regulated by the ASIC, CySEC and FSA, and has attracted more than 180,000 clients from over 200 countries.
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Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for traders at all levels.
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Eightcap is an award-winning, FCA-regulated broker offering industry-low trading fees. They are also the highest-rated brand by TradingView’s 50 million-strong users, who can trade directly on the platform. UK traders can sign up for a live account with an accessible £100 minimum deposit.
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Founded in 2009, Vantage offers trading on 1000+ short-term CFD products to over 900,000 clients. You can trade Forex CFDs from 0.0 pips on the RAW account through TradingView, MT4 or MT5. Vantage is ASIC-regulated and client funds are segregated. Copy traders will also appreciate the range of social trading tools.
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Established in 2008 and headquartered in Israel, Plus500 is a prominent brokerage that boasts over 25 million registered traders in over 50 countries. Specializing in CFD trading, the company offers an intuitive, proprietary platform and mobile app. It maintains competitive spreads and does not charge commissions or deposit or withdrawal fees. Plus500 also continues to shine as one of the most trusted brokers with licenses from reputable regulators, including the FCA, ASIC and CySEC.
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Markets.com is a respected broker, offering multi-asset trading opportunities through CFDs or spread betting (UK only). Established in 2008, the brand has an impressive 4.3 million registered customers and is overseen by trusted regulators, including the FCA, ASIC and CySEC. 79.1% of retail accounts lose money.
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Spreadex is an FCA-regulated broker that offers spread betting opportunities on an impressive 10,000+ CFD instruments including 60 forex pairs. Traders can also take short-term positions on sporting events. The brand has been around for over 20 years and has won multiple awards.
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Founded in 2015, VT Markets maintains its position as a top Australian multi-asset CFD broker. With 1000+ tradeable instruments and support for the MetaTrader 4 and MetaTrader 5 platforms, this broker delivers a wide range of trading opportunities to over 200,000 clients worldwide. VT Markets is regulated by the ASIC, FSCA, and FSC.
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Trade.com is a trustworthy online broker with a global presence. The broker offers 2,100+ CFDs in major markets, as well as futures, options and more. The broker offers best-in-class platforms and superior analysis tools for experienced traders. The broker is also regulated by top-tier authorities including the FCA and CySEC.
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Grand Capital is a MetaTrader broker with welcome bonuses, trading competitions and an intuitive copy trading service. Several account types and 400+ assets provide trading opportunities for various types of investors and strategies. New users can also open an account and start trading in a matter of minutes.
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Ingot Brokers is a multi-regulated brokerage established in 2006. The broker offers CFD trading opportunities on 1000+ instruments including forex, stocks, indices, commodities and cryptocurrencies. The broker supports the MetaTrader 4 and MetaTrader 5 platforms and offers both raw spreads and commission-free account options.
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Pacific Union Prime is an FSCA and offshore-regulated multi-asset broker offering competitive fees and direct market access on forex, commodities, stocks, bonds and indices. The broker supports the popular MetaTrader 4 and MetaTrader 5 platforms and a proprietary mobile app. Fees vary by account type with no commission and spreads from 1.9 pips on the Standard account and $7 commission per lot and spreads from 0.4 pips on the Prime account.
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ActivTrades is a UK-headquartered CFD and forex broker established in 2001. The award-winning brokerage has secured licenses from trusted bodies, notably the UK’s FCA, and facilitates trading on over 1000 instruments spanning 7 asset classes, with over 93.60% of orders are executed at the requested price.
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SimpleFX is an online broker specializing in CFD and cryptocurrency trading, with multi-currency accounts, STP execution, low pricing and no minimum deposit. Bringing innovation and gaining recognition at numerous industry events since 2014, SimpleFX now caters to retail traders from over 190 countries, boasting a client base exceeding 200,000 active users.
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Established in 2005 in Australia, FP Markets is an ASIC- and CySEC-regulated broker boasting an extensive suite of tradable assets. Its Standard and Raw accounts cater to traders at every level, while it packs a punch in the tooling department, from the MetaTrader suite and intuitive TradingView to actionable trading ideas from Trading Central and AutoChartist.
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Infinox is a UK-based and FCA-regulated broker that offers diverse trading products thanks to its STP and ECN account types and support for MetaTrader 4, MetaTrader 5 and a proprietary platform. Clients can also benefit from a free VPS that can support automated strategies and a social trading platform, catering to both beginner and seasoned traders.
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Saxo Markets is a multi-award-winning trading brokerage, investment firm and regulated bank. With a huge 72,000+ trading instruments, plus investment products and managed portfolios, clients have no shortage of opportunities. The trusted brand also offers transparent pricing and top-tier regulatory protection from 10+ agencies including FINMA, FCA & ASIC.
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Admirals is a multi-regulated broker with an excellent range of leveraged instruments, including forex, stocks, indices, ETFs, commodities, cryptos and more. The broker supports the MetaTrader 4, MetaTrader 5 and TradingCentral platforms. With both spread betting and CFDs available and thousands of instruments, this broker provides more flexibility than most rivals.
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FXCentrum is an offshore broker that offers highly leveraged, commission-free trading on diverse instruments with tight spreads. Traders can access forex, equity and commodities markets via MetaTrader 5 or the proprietary FXC platform and use the award-winning ZuluTrade platform for copy trading.
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Vault Markets is an award-winning brokerage headquartered in Namibia. It is an accessible direct-market-access CFD broker with affordable minimum deposits, flexible funding methods and high leverage. This broker offers a very large range of forex pairs as well as commodities and indices through MetaTrader 4 or MetaTrader 5.
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Capital.com offer CFDs on a range of markets with competitive spreads and zero commissions. The broker also offers the Investmate app, negative balance protection and leveraged trading.
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Trading 212 is a European and UK-regulated CFD broker that also offers stock investing and ISAs. It’s best known for its commission-free trading model and beginner-friendly app, which has helped it attract 2.5 million users and £3.5 billion in client assets.
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LegacyFX is a multi-asset broker offering an MT5 download & free signals.
Volatility Index Trading
A volatility index measures the expected volatility of a market by gauging investors’ sentiment over a specific period.
- There are volatility indices on interest rates and forex, but the most popular indices measure the volatility of stock exchanges
- The CBOE’s VIX 75 is the “original” and most popular and commonly traded volatility index
- Brokers may offer financial products based on volatility indices such as CFDs
- Investors can also take a position on a volatility index through a specialised ETF or ENF
- Some brokers also offer synthetic indices, based on random number generators and not real-life market movements
The first and most popular volatility weighted index – the VIX – began its life in 1992, when the CBOE hired finance scholar Bob Whaley to develop a system based on his theoretical work to calculate stock market volatility. Whaley based the system on data from the index options market, reasoning in simple terms that a higher number of investors in options would indicate more negative sentiment among investors. In other words, more fear.
Also known as the “fear gauge” or “fear index”, the VIX 75 measures the volatility of the S&P 500. Many other exchanges also have their own volatility index – for example, the NASDAQ 100’s VOLQ, the NIFTY 50 index measuring India’s NSE, CBOE Gold (ticker symbol: GVZ), the FTSE 100 VIX (ticker symbol:VFTSE), and the VHSI measuring the Hang Seng Index in Hong Kong.
Additionally, some brokers such as Deriv.com offer their own proprietary synthetic indices today, which use random number generators to simulate the movements of organic markets. Synthetic indices should be audited and cryptographically secure, and they will work according to specified criteria – for example, some brokers offer synthetic indices with set levels of volatility between 10% and 100%.
Synthetic indices are available 24 hours a day since they rely purely on simulated and not market data. This means they will not be affected by surprise real-world events that cause sudden rises in volatility, and since they are not linked to any underlying market, they are also immune to liquidity risks.
However, many traders who believe a winning strategy can be derived from following current events and predicting human psychology prefer the – well, volatility – of the real-life market, and see synthetic indices as closer to gambling.
All in all, the VIX is both the most commonly traded volatility index worldwide and should be the easiest to find at a UK broker. As a result, there is more readily available information on the VIX than on any other volatility index, making it an excellent place to start for most investors.
How To Choose Brokers With Volatility Index Trading
The first step for investors looking to start trading volatility indices is to work out what you want to trade. This could depend on a range of factors, but in general, you should aim to trade volatility on a market you know well.
While any volatility index may be used as a source of information to inform your trades on a certain market, if you want to base a trade on the movement of a volatility index you will need access to either a financial product, such as a futures contract, a specialist exchange-traded fund (ETF) or an exchange-traded note (ETN). The options for making such trades are limited, and most of the products which are widely available in the UK are based on the VIX or synthetic indices.
The following platforms and brokers with volatility index trading are among the most popular in the UK:
Deriv
Deriv is a popular online platform available in the UK under a demo account setting which offers high-leverage CFDs on a range of synthetic indices through the MetaTrader 5 (MT5) platform.
Traders can place leveraged bets on four real-time synthetic indices using this platform, or access a wider range of options trades on an even wider variety of indices if they use the DTrader, Smartbot or SmartTrader platforms.
Note, to place live trades open an account with one of the providers below.
Pepperstone
The Australian-based Pepperstone is another of the brokerages available in the UK that offers volatility index trading, with investors able to make trades with up to 1:10 leverage on the VIX. No deposit limits also mean its easier to open an account and can get started.
As well as winning numerous awards, such as the UK Investment Trends’ client satisfaction and value for money prizes, Pepperstone supports platforms including MT4 and MT5, cTrader and TradingView, making it a top choice for traders.
IC Markets
This is one of the most popular brokers with volatility index trading. IC Markets sells CFDs on VIX futures, accessed through the MT4, MT5 and cTrader platforms. It also offers clients a range of educational material as well as a free demo account to practice what they learn.
IC Markets is regulated by the Australian Securities & Investments Commission (ASIC), the Cyprus Securities & Exchange Commission (CySEC), and the Seychelles Financial Services Authority (FSA). UK traders can get started with a £200 minimum deposit. A free pip calculator is also available.
Volatility 75 Index Trading Strategies
There is no single killer strategy for volatility index trading. The first thing to keep in mind is that the index will tend to increase when the market isn’t doing well – remember, there’s a reason they call the VIX the fear gauge, and when traders get rattled both the price of options and VIX futures will rise.
However, that doesn’t mean there will always be an inverse correlation between a volatility index and the market it is based on. It is possible, for example, for the S&P500 to steadily underperform for months, without any concurrent rise in the VIX. At the same time, if large institutions fear that the market is overheating during a period of rapid growth, both the S&P500 and the VIX could rise at the same time.
Studying historical and live charts of the VIX or other similar indices and comparing them to the assets they are based on is one way that traders can benefit from these indices. If they are familiar with the patterns that show, for example, periods when an asset or index has been overbought, they will be able to more accurately judge when a similar scenario starts to play out, and plan accordingly.
For example, a period after the VIX has reached a resistance level would indicate widespread fear in the S&P 500. This will bring to many traders’ minds the old advice from Warren Buffett to “be greedy when others are fearful”. In fact, this idea is so common that it forms the basis of a popular volatility index mantra – “when the VIX is high, time to buy.”
Above all, traders must bear in mind that the VIX measures the sentiment in the market – not its overall performance – and the implied future volatility over the next 30 days, rather than the current level of volatility.
Nevertheless, unexpected bad news that sets markets tumbling – such as the Russian military escalation and invasion of Ukraine in early 2022 – can also lead to extreme price movements in volatility indices.
It is rarely possible to predict this type of black swan event. But if you have a lot of long bets on the S&P500, this means that a long position on the VIX could be wise as a hedge against the type of unexpected news that would otherwise leave you reeling.
It is also important to note that the ETFs and ETNs based on the VIX follow their own investment criteria, and will not automatically behave in the same way as the volatility index. In addition, all indices behave differently, so the volatility index 25 will have distinct characteristics from the JSE and L&S volatility indexes, for example.
Bottom Line On Volatility Index Brokers
Brokers with volatility index trading offer investors access to unique financial products that can be lucrative in the hands of skilled traders. They can also act as useful financial indicators and tools for hedging. However, since the VIX 75 and other volatility indices behave in a specific way that mirrors market sentiment rather than performance, traders must learn the right way to read charts if they want to profit from volatility.
Use our list of the best brokers with volatility index trading to get started.
FAQ
What Is A Volatility Index?
Volatility indices measure the sentiment of a market, often measuring the popularity and price of options contracts to predict the level of fear in the market over a specified period. There are volatility indices for many different assets including gold and forex as well as exchanges including the NAS100 FTSE100, the NIFTY50 for India’s NSE, and Japan’s JPY volatility index. However, the original and most popular is the VIX75, which gauges fear in the S&P500.
Which Brokers With Volatility Index Trading Are Best?
The best broker for you will depend on your trading style and the specific features you need. Are you already a master of the MT5 or cTrader platforms? Then a broker like IC Markets might suit you. Do you prefer to make trades from your browser window? Then look into a platform like Pepperstone. Are you more interested in trading synthetic indices than real-life markets? Look into a trading broker like Deriv.com.
What Is The CBOE’s VIX 75?
The CBOE VIX 75, also known as the fear index or fear gauge, is the original and best-known volatility index. But it is not the only volatility index, and on the S&P 500 alone, additional insights can be gleaned by studying the S&P Low Volatility Index, which measures the sentiment around the S&P 500 stocks with the lowest volatility.
What Is The Best Strategy For Volatility Index Trading?
There is no one best strategy – you will need to develop your own through research, hard work, plus trial and error. Fortunately, many of the trading brokers which offer products based on volatility indices also give users access to demo accounts, allowing them to make as many paper trades as they need to get comfortable with the platform and develop their volatility index killer instincts.
At the same time, traders can study charts and historical data offered by brokers with volatility index trading to make sense of how it fits into wider market movements. Did the market move as expected, according to the volatility index’s predictions?
If not, why not? Trying to answer these questions and familiarising yourself with charts will often pay off, as it gives traders more of an insight into how markets move, what drives market sentiment, and when and why the sentiment can be mistaken.
How Does A Volatility Index Help Traders?
One way a volatility index like the VIX 75 can help traders is by giving signals about the best time to make trades. If the VIX 75 has reached resistance levels, it indicates that fear in the market is widespread, and the common belief is that this would be a good time to buy. Conversely, if the VIX 75 is near support levels, this could indicate market complacency and alert traders will often look to sell.