VIX is the Volatility Index created by the Chicago Board Options Exchange (CBOE) to measure stock market volatility. Computed in real time throughout the trading day, VIX provides a minute-by-minute snapshot of expected market volatility over the next thirty days.

Introduced in 1993, VIX is considered by many to be a very good indicator of investor sentiment and market volatility. VIX measures market expectations of near-term volatility conveyed by stock index option prices. The value of VIX is based on options on the S&P 500 Index, the domestic index most often used in over-the-counter volatility trading.

VIX uses index option prices to measure the market's expectation of volatility and uses a weighted average of options with a constant maturity of thirty days to expiration. VIX represents the implied volatility for hypothetical put and call (the right to sell and buy) options, where the option value matches the “strike price,” or the price specified in the contract in which the option can be bought or sold.

Since investor uncertainty can lead to high market volatility, the VIX is sometimes called the “investor fear index.” Market declines usually go along with financial stress, and in turn options prices and VIX tend to rise. The greater the investor fear, the greater the VIX. As the market recovers and investor fear subsides, the VIX also tends to drop. This measure is inversely proportional to the stock market.

VIX and S&P 500 came together to form the S&P 500 VIX Futures Index Series. This index seeks to model the outcome of holding a long position in VIX futures contracts. The series is comprised of the S&P 500 VIX Short-Term Futures Index and the S&P 500 VIX Mid-Term Futures Index.