Volatility According to the VIX
A final measurement of volatility worth mentioning is the Chicago Board Options Exchange (CBOE) volatility index, or VIX.
The VIX tracks the speed of index option change among the S&P 500 index of stocks. It produces a weighted average of estimated volatility. It is also called the “fear index,” as it reflects investor nervousness about price levels in the S&P 100, meaning movement in the VIX reflects overall volatility. However, VIX is removed from direct volatility in stocks. It measures the implied volatility of options rather than directly tracking stocks. The concept of a financial index measuring stock index volatility was first proposed in 1989.2
Key Point
The VIX measures volatility in the moment, but ...
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