The Volatility Index


The volatility index (VIX) measures the volatility of a wide range of options on the S&P 500 Index and is used to gauge the markets’ expectations for volatility over the next 30 days. Quoted as a percentage, a VIX figure

greater than 30 is associated with high volatility resulting from investors’ fear of uncertainty, while values under 20 are associated with relatively low volatility or less anxiety about the market. Low values may also reflect complacency arising from overconfidence with a rising market, or exuberance. Accordingly, the VIX is known as the fear index. During the market crash of October 1987, the VIX shot up to a record high of 172 from the mid-20s in the prior week. Continue reading