What Is the Volatility Index? The Volatility In
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The Volatility Index trades under the ticker symbol VIX. That's why they call it the VIX. The VIX measures the premium, or price, of put options on the S&P 500 index. I know, I looked it up...
Now, a put option is a downside play on a stock or index. You buy a put option on, say, Apple, and if Apple falls in price, your put option will be worth more money. (Strategy advice: don't buy put options on Apple.)
Put options are often thought of like insurance. It works like this: Say you own $1 million of Apple stock (congratulations!). You could put down $10 grand and buy some put options.