TIME– The VIX has been making headlines.  No, not the rock band or the cold remedy but the Chicago Board Options Exchange (CBOE) Volatility Index, or VIX, which has been on a wild ride over the past year.  The stock market crash set this indicator of volatility soaring above 80 – for perspective, the VIX has historically averaged around 20. 

The VIX attempts to predict the volatility of the S&P 500 index over the next 30 trading days using options data from the index’s 500 underlying stocks.

What is next for the VIX?  That all depends on investors’ fear of a further decline in stock prices.  Remember:  even if the VIX continues to fall, that does not mean that high volatility for stocks is finished.  Investors should still hope for volatility, realized from a recovering rally.  But a low VIX – signaling reduced uncertainty – would likely signal a coming rally, rather than stagnation in prices.

We’re still a long way from the halcyon days of yore – remember, the VIX long term average is half of today’s level – but investors at least seem to once again believe that day will follow night.  And that’s good news. 

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1. Gut Check Time and the Transfer of Wealth
2. Putting Recent Volatility in Perspective
3. Historic Volatility
4. Understanding Money Supply & Inflation
5. Stock Market Volatility & Investor Expectations

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