The VIX measures the market expectation of 30-day near term volatility conveyed by stock market option prices. VIX is based on real time option prices which reflects the investors view of future stock market volatility.
In times of high financial stress, often during hard market declines, option prices as well as the VIX tends to rise. The more intense the fear, the higher the VIX level. As market and investor fear subsides, option prices begin to decline, which causes the VIX to decline.
This is why the VIX is called the "investor fear index". But also keep in mind that there are variations to this rule.
It is important to remember that the VIX reputation as the "fear index", doesn't necessarily mean the market is bearish for stocks. But instead the VIX is a measure of "perceived" volatility in either direction, including the upside.
An investor can use the VIX to measure volatility. A high VIX corresponds to a volatile market which usually means one headed downward. Also a low Vix usually indicates a stable and usually rising market.
An investor can use the VIX to measure volatility. A high VIX corresponds to a volatile market which usually means one headed downward. Also a low Vix usually indicates a stable and usually rising market.
VIX is more than a fear gauge. It's a risk power tool.
Manage risk, diversify your portfolio and leverage volatility with VIX options and futures, offered only at CBOE and CBOE Futures Exchange.
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