11/20/2008 05:12 am ET Updated May 25, 2011

What Is Volatility? Meet The VIX, Or Volatility Index

Fear is running high on Wall Street. Just look at the Fear Index.

With all those stomach-churning free falls and sharp reversals in the stock market recently, traders are keeping a nervous eye on an obscure index known as the VIX.

The VIX (officially the Chicago Board Options Exchange Volatility Index) measures volatility, the technical term for those wrenching market swings. A rising VIX is usually regarded as a sign that fear, rather than greed, is ruling the market. The higher the VIX goes, the more unhinged the market looks.

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