The VIX can spike when investor concerns are heightened by events like the raising of interest rates by the Federal Reserve or the Covid-19 pandemic.
The volatility index, also known as the VIX, essentially takes a reading of the stock market's blood pressure, measuring investors' fear.
"It's just a unique tool that we can actually quantify that [concern]," Lindsey Bell, chief markets and money strategist at Ally Financial, told CNBC."It's measuring implied volatility over the next 30 days, and that's derived from option activity," said Jason Snipe, founder and chief investment officer at Odyssey Capital Advisors."That's the catalyst for what moves [the VIX] in either direction.
Investors can use the VIX to help them make buying and selling decisions, or they can indirectly invest in it.
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