VIX (Volatility Index)

VIX is volatility index compiled by Chicago Board Options Exchange (CBOE), measuring market expectations of 30-day volatility for S&P 500 index. VIX is known as "fear index" or "fear gauge"; high VIX indicates market panic and high volatility expectations, low VIX indicates calm markets.

Types

VIX is primarily used for risk management and market sentiment analysis. VIX typically has negative correlation with stocks: VIX rises when stocks fall, VIX falls when stocks rise. VIX can serve as contrarian indicator; when VIX reaches extreme highs (>40), may be opportunity to buy stocks. VIX also used for hedging strategies, hedging stock portfolio risk through VIX futures or options. Many traders monitor VIX trends and extremes as reference for market sentiment. VIX cannot be traded directly, but can be traded indirectly through VIX futures, options, or ETFs.