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Finance Glossary

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VIX

Definition:

Volatility Index, ticker: VIX. It's about how choppy the market has been the last 200 days.

Example

Here's the VIX.

It's mapping investor worry. But its most important contribution to the world is its use in pricing derivatives. Puts and calls rely heavily on what the VIX is doing when they view the cost of risk mitigation. And oddly, when the market is cratering / low / falling / letting the bears crap all over the front lawn...the VIX is usually a HIGH number, meaning that it is discounting MORE risk rather than less. You'd think that if the prices of the stocks in the market were low, there'd be LESS risk in the market. But we live in a highly momentum-and-trading-driven investment world so things that are low are perceived to be going lower; and visa versa. 

Odd, but welcome to our world. 

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