VIX is the ticker symbol for the CBOE Volatility Index. The VIX is a measure of the implied volatility for the next 30 days on the S&P 500. The VIX is calculated using both calls and puts for the S&P 500.

vix-chart

The VIX is often called the fear gauge.

The VIX spikes higher in times of fear and broad market sell-offs.

On days where most traders are bullish, call option buying (a bet that the market will move higher) generally outnumbers put option buyers. This kind of market typically reflects greed and a lack of fear. Conversely, on days where most traders are bearish, put option buying (a bet that the market will move lower) outnumbers call option buyers. This increased amount investors are willing to pay for put options shows up in higher readings on the VIX.

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