What Is the VIX Index
2 min read Β· Β· Korean original
Contents 4
The VIX index is an indicator created by the Chicago Board Options Exchange (CBOE) in the United States to measure stock market volatility. The VIX is calculated from the volatility of S&P500 index option prices, and it reflects the market's expectations for stock market volatility over the next 30 days.
With the VIX index, many investors can forecast and quantify the future volatility of stock prices. There is no underlying asset you can buy directly. The VIX is traded through futures-based ETFs or ETNs.
π‘ In simple terms?
The VIX index is an indicator that shows how investors expect the stock market's volatility to play out over the next 30 days. It helps investors gauge the future volatility of stock prices and plan their investment strategies. The VIX rises when stock prices swing up and down, and falls when the stock market is stable.
π What the VIX index means and how it's used
The VIX index is also called the recession index or the fear index. The more volatile the stock market becomes, the higher the VIX climbs, and the more stable the market is, the lower the VIX goes. Changes in this index tend to move in the opposite direction of the stock market's gains. During stock market downturns, the VIX can rise to reflect the turbulence in stock prices. That's why the VIX index can help you anticipate where the stock market is heading and build an investment strategy.
π How predictable is the VIX index?
The VIX index changes easily, influenced by interest rate decisions, the release of Fed meeting minutes, major market indicators and more. It tends to react sensitively regardless of how the stock market itself is moving. It also tends to rise or fall ahead of the monthly VIX rollover period or futures and options expiration dates. This volatility helps investors who use the VIX index forecast how volatile the stock market will be going forward.
π To sum up
The VIX index is an indicator of stock market volatility. It expresses how much stock prices swing and is also called the recession index. The VIX rises during periods of high volatility and falls during periods of low volatility. It is influenced by things like major economic data releases, separately from the current flow of the stock market. With it, investors can forecast the future volatility of stock prices and build their investment strategies.
