Understanding Volatility and the VIX ‘Fear Gauge’: QuickTake

Markets go up and down; the amount they move is their volatility. In normal times, traders like a dose of volatility, and betting on its levels has become a market of its own. When times aren’t normal, like early in the Covid-19 pandemic, the worry was that extreme financial turbulence was feeding on itself -- prompting the U.S. Federal Reserve to step in. Now with the central bank set to reverse course amid surging inflation, the effects can be seen playing out again across stocks, bonds and commodities.

Basically, the rise and fall of prices in financial markets. Downward moves tend to get more attention and be more associated with volatility, as they also tend to fuel concern about what’s coming next.