The VIX or the Cboe Volatility Index measures the expected volatility of the S&P 500 over a three-day time frame. Explained in a different way, the VIX reflects investor expectations of market volatility. When the VIX is higher, the greater the expectation that stocks will move meaningfully in either direction; this was especially high during the most recent recession in 2008. As explained by The Wall Street Journal, volatility is imperative to options traders, as they try to capitalize on the swings and make a return. However, it also has value to ordinary investors. By tracking the VIX, it can give a sense of the market’s overall mood as well as insight into whether the options market expects smooth or rough times ahead.
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