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A closer look at the VIX – what is it really telling us?

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October 05, 2011 – Comments (0) | RELATED TICKERS: VIXY , VIXM

A closer look at the VIX – what is it really telling us?

In these ‘harder’ times we are used to seeing the VIX move in large chunks.  Some days we can see the VIX up or down as much as 10%.  Most traders have come to understand the VIX as the ‘fear index’.  Basically if the VIX goes up there is more fear in the market and likewise when it moves lower it means times are now calm.

Most traders also know that the VIX is a mean reverting device.  That means it usually hovers around one general area and when it moves out of that area it will soon return.  The VIX typically trades below 20 (calm).

So what is the VIX exactly?

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