What's the VIX? - Measuring Market Volatility

What's the VIX?

The VIX goes by many different names. The Cboe Volatility Index, the Volatility Index, the Fear Index, or the Fear Gauge. One name that it doesn't go by, however, is Vicks. It's important to make the distinction that the VIX and Vicks are different things. 

Unrelated fun fact: Michelin Tires and Michelin Stars are by the same company. 

The VIX is updated every 15 seconds during market hours, and it reports on the expected volatility of the market, specifically for the S&P 500 stocks. Since the S&P 500 is considered a benchmark for the market, the VIX is widely used.

The VIX typically stays within the range of 12-35, with notable outliers like November 20, 2008 when the VIX closed at 80.86 and March 16, 2020 when the VIX closed at 82.69. Just based off of these dates and the price, you'd be right to assume that the higher the VIX, the higher the volatility is. Generally, the price being in the low teens indicates low volatility for the market. 

Fun Fact: You can also trade derivatives (options, futures) of VIX since it's an index like the S&P 500 and the Nasdaq 100.

Although the recent jumps in the chart aren't as extreme as the jumps in the 2008 Housing Crisis or COVID-19 Crash, it's still clear that there have been some spikes. Though they have seemed to have settled as markets have become less reactive, I personally speculate that when data regarding the economic effect of the tariffs are out, there will be another spike. Tariffs are just another thing that many investors are worried about, with economic uncertainty and interest rate anxiety agitating many investors.