Great question!
The VIX measures the market’s expectation of 30-day volatility based on S&P 500 option prices.
When the VIX is high, it signals that investors expect significant price swings, often due to uncertainty or fear. When it’s low, it suggests calm and confidence in the market.
You can trade the VIX indirectly through ETFs or futures, which track its movements.
For example, VIX ETFs like VXX or UVXY allow you to speculate on volatility without dealing with complex options.
However, these instruments are better suited for short-term trading because they’re designed to track daily changes and can lose value over time due to contango (when futures prices are higher than spot prices).
Trading the VIX can be a useful hedge during market downturns, but it’s important to understand the risks. It’s highly volatile and can move quickly, so it’s not ideal for long-term holds.
