Do you know what the fear index is?

Do you know what it is to be afraid? Bags of the whole world yes. They’ve been through it—and a lot—in the last few days. Interestingly, there is an indicator called the fear index. It is called Vix and can give us clues about potential stock market movements in the future. Before continuing with his explanation, u Vocational school for traders They describe this situation as follows: “Fear is a more powerful feeling than greed, and especially in its extremes, panic is much more powerful than euphoria.” When people are motivated to buy, the uptrend is solid, the wind is in its favor and the price moves slowly but surely. The masses calmly enter and exit the market. […] When the price turns around and starts to fall, people get scared. Like a big snowball, the mass begins to release its action faster and faster. Suddenly panic sets in. Sales order flow occasionally multiplies, and supply dramatically exceeds demand. The price is sinking into the void at breakneck speed.

Santiago Carbodirector of financial studies at Funcas, answers the following questions:

“What is the Vix Index?”

It’s an index Chicago Board Options Exchange Market Volatility Index (in Spanish: option market volatility index tan from Chicago). Volatility is a sign of uncertainty, and uncertainty, when high, can be interpreted as “fear”. Hence the name.

— Who created it and when?

—It was developed in 1993 by the aforementioned Chicago Options Market. On October 23, 2008, it reached the highest level in its history, at the height of the financial crisis, with a level of 96.40.

“What does it mean to be tall?” And what is low?

— At times of high volatility, the Vix index reaches high numbers and they correlate with the decline in the S&P 500 index, indicating that there is fear in the market.

— How is it calculated?

— Taking the weighted average of the implied volatility of eight options call and OEX put (S&P 500 options). [Una call es una opción de compra a un precio determinado en una fecha concreta y una put es una opción de venta a un precio también determinado previamente]. These options measure the risk of assets and their movements capture that volatility.

“Is it reliable?”

“It’s just another indicator of risk.” Various analyzes suggest that, in moments of uncertainty, it tends to provide a slightly more narrowed vision, overestimating risk. On the contrary, in calmer moments he tends to underestimate it.

— Where can one consult?

https://www.cboe.com/tradable_products/vix/ [La web incluyen información sobre unas clases para adquirir conocimientos sobre el manejo de distintos instrumentos financieros a las que usted siempre se puede apuntar si se siente capacitado].

How has it developed in recent months?

— On March 13, it rose to 26.52. But last year it exceeded the level of 30 several times, especially after the outbreak of the war in Ukraine. The Vix index was 19.11 basis points on March 8. Two days later (after the collapse of American banks) it rose 25%. On Wednesday the 15th, it jumped to almost 28 points. This Friday it was around 22. We will see on Monday what will happen with Deutsche Bank.