To understand market risk using the VIX index, you need to track the VIX value regularly. The VIX shows how much volatility or price change investors expect in the market over the next 30 days. If the VIX is high, the market is expected to be very uncertain. If it is low, the market is considered stable. This helps you decide when to invest or be more cautious.

What Is the VIX Index?

The VIX index, also called the Volatility Index, shows how much price change or "volatility" traders expect in the market. It is calculated based on options prices of the S&P 500 index. If the VIX is high, it means traders expect big changes in prices, which usually happens when there is fear or uncertainty in the market.

Why Is the VIX Called the Fear Index?

The VIX is called the "Fear Index" because it rises when investors are scared about the market. When there is bad news like economic slowdown, war, or any big crisis, investors start buying more options to protect themselves. This increases the VIX. So, a rising VIX shows fear, and a falling VIX shows confidence in the market.

How Can You Use the VIX to Make Investment Decisions?

When the VIX is low (below 20), it means the market is calm. This is usually a good time to invest, especially for long-term investors. When the VIX is high (above 30), the market is very volatile. At this time, it’s better to be careful, wait, or hedge your positions. Traders also use VIX to time entry and exit points based on market moods.

What VIX Level Is Considered High or Low?

Generally, a VIX value below 15 is considered very low, showing low volatility. A VIX value between 15 and 20 is seen as normal. If the VIX goes above 30, it means very high volatility and possible market panic. Investors use these levels to understand how risky the market is at that time.

How Does the VIX Affect Stock Prices?

When the VIX is high, it usually means that investors are scared and might start selling stocks. This can bring stock prices down. When the VIX is low, people feel safe and start buying, which pushes stock prices up. So, the VIX often moves in the opposite direction of the stock market.

Is the VIX Used in India Too?

Yes, in India we have India VIX, which shows the expected market volatility based on Nifty 50 options. It works the same way as the US VIX. A high India VIX means a lot of uncertainty in the Indian stock market. Traders and investors in India use India VIX to make better decisions during market ups and downs.