Looking at Volatility (VIX)

“Trying to make sense of volatility”

The VIX is a volatility index that shows what the market expects 30-day volatility to be. It is calculated through the implied volatility on S&P 500 Index options. The VIX typically has a negative correlation to the overall stock markets, i.e. when the S&P 500 increases, VIX decreases.

How can it be used? As this is a product that is “forward looking” we can try to gauge where it will be in the short-term.