Global stock markets have bounced back and all is well. But we have been closely watching one index that was going up when the others were falling.
This is the Chicago Board Options Exchange (CBOE) VIX index. It is based on the implied volatility of options traded on the CBOE.The VIX sometimes called the “fear guage”—an indication how nervous investors are. The VIX has been trading this week in the 15-16 range,which is almost twice its level not too long ago.
Investors have been shaken out of their complacency this week. The VIX has climbed as stocks fell globally. VIX index more than 20 is like a flashing amber light, indicating that investor fears are significant, said financial experts. The VIX touched 30 in May 2006, when there was a huge sell off in emerging markets. Fear is back, though in a muted form. But we advise you to watch the VIX—and its tricks.