The VIX Files: Reading the Market’s Mood Swings

If the financial world had a mood ring, it would be the VIX. Known formally as the CBOE Volatility Index, the VIX doesn’t tell us whether markets are going up or down – it tells us how nervous investors are about what’s coming next. Consider it the financial world's stress-o-meter.

Created by the Chicago Board Options Exchange, the VIX measures how much volatility investors expect in the S&P 500 Index over the next 30 days. And rather than asking traders to spill their secrets in a WhatsApp group, it uses something more concrete: options prices.

Options: What They Are and Why They Matter

Options are financial contracts that let investors protect themselves against losses – or have a punt on where markets might be heading. When uncertainty rises, demand for these contracts – especially “put” options – tends to surge.