Us stocks plummeted, and the green color made people panic. The three major stock indexes all fell more than 3.4%. The Dow Jones index fell 940 points, the biggest one-day drop since June. The Standard & Poor's 500 Index closed down 3.53%; Technology stocks led the decline in Nasdaq, NVIDIA fell more than 5.7%, Google, Twitter and Microsoft fell more than 5%, and Apple fell more than 4.6%. Major European stock indexes also fell by more than 2%. But there are signs that it is not a good red. The greater the market volatility, the more investors panic, and the higher the index usually jumps, the redder it is. This is VIX (fear index).

Although the VIX index is usually called. Fear index? But a higher VIX index does not mean a bear market. In contrast, the VIX index measures the direction of market fluctuations, including positive changes. Usually, when investors expect a big positive trend, they are reluctant to sell call options unless they pay a high premium for it. Only when the price is expected to rise sharply will the buyer be willing to spend a lot of money to buy options. The market thinks that the probability of rising and falling is the same, and the risk of loss when the seller sells any option is the same. A high VIX index indicates that investors expect a lot of fluctuations in the market, both positive and negative. When investors expect the market to fluctuate greatly, the VIX index peaks; The VIX index is at a low level only when investors think that there is neither a big downside risk nor a big upside potential.

The stock market is short-term and short-term. Investors tend to be bearish, most of them are optimists, and many are killed by panic. Therefore, there is a negative correlation between VIX index and stock index. Therefore, the volatility index is also used by some investors as an indicator of future trends. VIX index measures how much investors are willing to pay for the risk of their investment. The bigger the number, the higher the price they pay, so it is widely used to reflect investors' fear of the future. When the VIX index is lower than 20, it shows that investors are optimistic about the future market and are unwilling to hedge investment risks; On the contrary, when the VIX index is higher than 20, it shows that investors lack confidence in the future market. Usually, when the VIX index is higher than 40, it indicates that the market is irrational about the future and may rebound in the short term. In contrast, when the VIX index is lower than 15, it means irrational prosperity, which may be accompanied by selling. During the financial turmoil of 1998, the VIX index never exceeded 60. The VIX index may not accurately predict the direction, but it does reflect the market sentiment at that time.

The higher volatility index indicates that market participants expect more violent volatility in the afternoon, which also reflects their uneasy psychological state. The VIX index is low, reflecting the expectation of market participants, that is, the degree of market volatility will tend to ease. The VIX index itself is not tradable. One way to trade VIX is to trade the volatility of options. Another simpler way is to trade VIX futures trading funds. The VIX index reflects the market's measurement of the volatility of the S&P 500 index. In most cases, the three major stock indexes in the United States have the same trend, and the VIX index is not a perfect reverse indicator to measure the Dow and the VIX index.