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VIX (Fear Index)
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The VIX is an index calculated by Cboe from S&P 500 option prices that shows the volatility the market expects over the next 30 days, as an annualized percentage.
It stays low when markets are calm and jumps during sharp sell-offs and uncertain periods, which is why it is called the fear index. It cannot be bought directly, and VIX futures and the funds built on them can behave quite differently from the index itself.
Example
A VIX of 16 means the market is pricing about 16% annualized volatility for the S&P 500, which works out to a one-month standard deviation of roughly 4.6% (16 divided by the square root of 12).
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