The Volatility Index (VIX) measures whether or not there’s too much fear or optimism in the markets. Robert Whaley, father of the VIX, says at the “beginning of the week it was about at a level of 12, at the end of the week it was at 28. That was the biggest percentage increase the VIX has ever had in its entire history.”
Currently, the VIX is around 34 percent. But what exactly does that mean? “It’s a measure of the volatility you expect over the next 30 days,” Whaley says. He adds that the VIX is usually around 20 percent.
So what happened with the VIX on Monday? “The spread between the bid and the ask was so large that it introduced a lot of noise into the VIX itself,” he says. Basically there was too much volatility for the volatility index.
Whaley explains, “I think the market’s simply overreacting to what’s going on in China.”
Moving forward, Whaley says things will get better.
“Things will calm down. There’s just too much repeated information flow about one issue, and it just has tended to scare people.”
Featured in: Marketplace for Wednesday, August 26, 2015