The CBOE Volatility Index, or VIX, is a key measure of market expectations of near-term volatility taken by S&P 500 stock index option prices. It is sometimes considered the "fear gauge."
The term volatility refers to the amount of uncertainty in the size, and direction, of changes in a security's value and is typically measured by the deviation of returns.
The VIX surged by 115.6% on Monday to 37.32. Early Tuesday it rose above 50, the highest level since August 2015. Then the VIX dropped to 22.42, rose to over 45, before fading to roughly 35.
One Wall Street veteran predicts the index's wild moves will cause the VIX to go higher. VIX is giving us signals that this year the markets could create a lot of investment opportunities as speculators can take advantage of the markets movement in either direction.
While there is no direct trading in the VIX, it is used by a number of derivative securities including futures and exchange-traded notes as a reference for volatility.
Barclays told its clients Tuesday it estimated Volatility Target funds will sell about $225 billion worth of stocks in the next few days to maintain their portfolio volatility targets.
Tuesday's moves in the VIX comes after a stunning decline of more than 80 in after hours trading Monday for the ETN VelocityShares Daily Inverse VIX Short-Term.
XIV is issued by Credit Suisse and is supposed to give the opposite return of the VIX.
Credit Suisse announced on Tuesday the last day of trading for XIV will be Feb. 20. The bank is triggering the liquidation of the product after its price collapse.