Volatility Index Has Been Volatile

Experienced traders are well aware of the Volatility Index - or VIX - and know that it can have a drastic impact on the how much the stock markets move in any given day.  Put simple, a low VIX number means there is not much fear in the market, and traders can expect smaller moves in the markets themselves.  Conversely, if the VIX is at a higher number, bigger swings can be expected.  Take a look at the VIX chart over the last 3 months:

You can see that in the beginning of August, the VIX made a major jump into the 40 range, more than double what it was trading at prior to this period.  And, if you look at market movements during this same period you will see huge swings, including 500 point moves on the DOW in a single day.

Again, the VIX let's traders know how much fear or uncertainty there is in the markets.  So, when you are looking to place trades, especially buy and hold trades, be sure to recognize what type of volatility environment you are in.  If there is a high VIX number, be ready for a wild ride like we have been experiencing since the beginning of August!