What Is the VIX?

The Cboe Volatility Index (VIX) is in short, a measure of volatility in the market. It is based on price changes within the S&P 500 Index, or the SPX as it is known by its ticker symbol. When the VIX goes up, then normally the SPX would be heading down from where it was, and vice versa.

Some people refer to it as the “Fear Index” as it tends to be an accurate measure of fear sentiment in the market. When the VIX index goes higher, this shows that there is more price volatility in the S&P 500, and more often than not, the market as a whole. When the VIX goes down, generally there will be smaller price moves long or short in the SPX, meaning the markets should be calmer and with less uncertainty.

If you want to dig further into the VIX, you can read more here.

How does Calm Hedge use the VIX?

There are a few key things that we use the VIX for:

• Deciding the spread or trade we are going to put on that day.
• Planning an entry or an exit to a position.
• Choosing position size for a given spread or trade. 
• Deciding if and when to adjust a position.