Why VSTOXX Is The Fear Index For 2025

European equity markets had a solid 2024, with the EURO STOXX 50® up around 8%. However, this performance did not come without a few instances of concern, such as the French and US presidential elections. European markets dealt with increased index option premiums around both events. In the US, the French election did not significantly affect volatility expectations compared to Europe, which was evident when using VSTOXX® to gauge expected volatility for European equities. 

VSTOXX® is best described as the European fear index. It quantifies expected volatility for the EURO STOXX 50® over the following 30 calendar days using index option pricing. Two types of fear drive VSTOXX® price action: reactionary and anticipatory. Reactionary price action happens when the EURO STOXX 50® declines during the day while the VSTOXX® rises, while anticipatory price action increases EURO STOXX 50® prices as a known market-moving event approaches. 

The French election in late June / early July 2024 boosted the VSTOXX® and was specific to European equities, with VSTOXX® reaching the upper teens. The front-month July VSTOXX® future traded from just over 14.00 to above 18.00 as the election approached. After the election, the July contract traded below 14.00 as concerns about the French election diminished.

The US election had a similar effect on VSTOXX®, with the index reaching the low 20s before the election and swiftly dropping to the upper teens afterward. The front-month November VSTOXX® future traded as high as 20.00 a couple of days before the election. By the end of election week, that contract was in the 16s. 

2025 will bring another volatility event specific to Europe with the German election. As the world’s third-largest economy, Germany has a significant impact on European markets. Therefore, VSTOXX® and VSTOXX® futures pricing should rise as election day approaches. This election takes place in late February, making March 2025 VSTOXX® futures the front-month contract at that time.

In anticipation of the German election, the March futures pricing shows a little extra risk as it trades at a premium to the April VSTOXX® futures. This situation is unique to the VSTOXX® complex and highlights the utility of VSTOXX® options and futures for speculating on or hedging against fluctuations in volatility expectations, especially for macro events that directly influence European markets. 

Do you want to learn more about VSTOXX® and stay on top of all things volatility subscribe to our free newsletter here.

VSTOXX® available at Interactive Brokers: Eurex Benchmark Derivatives | Interactive Brokers LLC

Check out our website with all relevant infos and futures and option prices.

Contact Matt Koren, Equity & Index Sales America at T: +1-917-495-2997 or email: matthew.koren@eurex.com.

Don’t miss the latest Options Insider Volatility Views episode in collaboration with Eurex. Listen here: https://theoptionsinsider.com/shows/volatilityviews/