The CBOE Volatility Index, known by its abbreviation VIX, is often referred to in the media as the "fear gauge" of Wall Street. It is an indicator and widely used tool that is intended to make the dynamics on the markets visible and interpretable with a measurable ratio, A large number of market participants include volatility as an evaluation criterion in investment decisions. In particular, larger fluctuations in the indicator are associated with an increase in nervousness. The latter manifests itself in a higher range of fluctuation and rapid changes in the direction of the markets that are difficult to predict, usually deviating from the usual ups and downs of the market.
Because of its importance, it has become an integral part of daily market commentary. Despite its popularity, VIX levels are often misunderstood or interpreted differently. The index is based on the prices of S&P 500 index options and forecasts the expected volatility of the U.S. equity markets for a period of the next 30 days. Many papers, some of them highly scientific, are devoted to its interpretability and predictability. "Reading VIX: Does VIX Predict Future Volatility?" is a treatise that offers interested parties simple explanations of how VIX levels can be interpreted and how potentially more meaningful predictions or measures of market sentiment can be translated.
CBOE Volatility Index Chart (Time Series, hist.)