It has been almost three years since the first VIX Index futures contracts started trading in November of 2023. The VIX Volatility Index, also known as the “Fear Gauge”, is one of the most closely watched financial indicators. It tracks the market’s expectations for stock market volatility over the next 30 days. It is used to understand the sentiment of investors as well as providing insight into how investors are reacting to changing fundamentals, news, and other factors.
The index is generated from a combination of both benchmark futures and the broader equity market. Specifically, it looks at option premiums for the S&P 500 index, which itself includes 500 of the largest public companies traded on the US stock exchanges. The higher the option premiums, the higher the VIX. When option premiums are high, it is typically an indication that investors are expecting more volatility in the near term.
In November of 2023, the VIX index was hovering around the 13 mark, suggesting that investors were feeling somewhat bearish yet still not overly pessimistic. This could be seen as a reflection of the post-pandemic market sentiment, as investors had seen the economy gradually improve throughout that period and may have been expecting that trend to continue.
In terms of how this index can help investors looking to the future, it can provide insight as to whether the market is likely to remain relatively calm or become increasingly volatile. For example, if the VIX was to steadily increase beyond 14, this could be interpreted as investors expecting more turbulence in the markets. On the other hand, if the VIX remained around the 13 mark or even dropped, this could be taken as a sign that investors are generally feeling confident with the market outlook and willing to remain exposed to varying levels of risk.
In conclusion, the VIX index is an invaluable tool for investors, providing a snapshot of investor sentiment in the shortterm. By understanding how the VIX changes over time, investors can gain a better understanding of what the market may be expecting in the near future. In November of 2023, investors were relatively bearish yet still not overly pessimistic, likely reflecting the cautiously optimistic attitude that has characterized the post-pandemic recovery.
It has been almost three years since the first VIX Index futures contracts started trading in November of 2023. The VIX Volatility Index, also known as the “Fear Gauge”, is one of the most closely watched financial indicators. It tracks the market’s expectations for stock market volatility over the next 30 days. It is used to understand the sentiment of investors as well as providing insight into how investors are reacting to changing fundamentals, news, and other factors.
The index is generated from a combination of both benchmark futures and the broader equity market. Specifically, it looks at option premiums for the S&P 500 index, which itself includes 500 of the largest public companies traded on the US stock exchanges. The higher the option premiums, the higher the VIX. When option premiums are high, it is typically an indication that investors are expecting more volatility in the near term.
In November of 2023, the VIX index was hovering around the 13 mark, suggesting that investors were feeling somewhat bearish yet still not overly pessimistic. This could be seen as a reflection of the post-pandemic market sentiment, as investors had seen the economy gradually improve throughout that period and may have been expecting that trend to continue.
In terms of how this index can help investors looking to the future, it can provide insight as to whether the market is likely to remain relatively calm or become increasingly volatile. For example, if the VIX was to steadily increase beyond 14, this could be interpreted as investors expecting more turbulence in the markets. On the other hand, if the VIX remained around the 13 mark or even dropped, this could be taken as a sign that investors are generally feeling confident with the market outlook and willing to remain exposed to varying levels of risk.
In conclusion, the VIX index is an invaluable tool for investors, providing a snapshot of investor sentiment in the shortterm. By understanding how the VIX changes over time, investors can gain a better understanding of what the market may be expecting in the near future. In November of 2023, investors were relatively bearish yet still not overly pessimistic, likely reflecting the cautiously optimistic attitude that has characterized the post-pandemic recovery.
