What is VIX (Volatility Index)?
A real-time index of expected S&P 500 volatility, known as the fear gauge.
Formal Definition
The VIX, published by Cboe, estimates the market's expectation of 30-day volatility in the S&P 500 by aggregating the implied volatility of a range of index options. Quoted as an annualized percentage, it rises sharply during market stress and falls in calm periods, earning its nickname as the market's fear gauge.
In Simple Terms
It is a thermometer for market fear. When investors are nervous and expect big swings, the VIX spikes; when they are calm and complacent, it drifts low.
Example
A VIX around 13 signals a calm market, while a spike above 40 during a selloff reflects widespread fear.