$Cboe Volatility Index(VIX)$The Chicago Board Options Exchange Volatility Index, or the ‘VIX’ as it is better known, is a measure of the expected volatility of the US stock market.

The VIX is based on the option prices of the S&P 500 Index and is calculated by combining the weighted prices of the index’s put1 and call2 options for the next 30 days.

The VIX is designed to reflect investors’ view of future US stock market volatility -- in other words, how much investors think the S&P 500 Index will fluctuate in the next 30 days.

Often referred to as the market's ‘fear gauge’, the VIX is used by investors to measure market risk, fear and stress, before they make investment decisions.

When there is a spike in the VIX, this means traders in the S&P 500 options market expect that market volatility will increase.

The higher the VIX Index, the higher the fear, which, according to market contrarians, is considered a buy signal.

Of course, the reverse is also true. The lower the VIX, the lower the fear, which indicates a more complacent market.