be defined as a sentiment ratio of Wall Street's fear or greed gauge. It is usually used by traders to check the grade of investor complacency or market fear. In practice, VIX is usually called the fear index. In case of increased VIX index, investors' sentiment leans toward higher volatility which corresponds to higher risk. If a VIX reading is under 20 it usually indicates that investors became less concerned; however, if the reading exceeds 30 it implies that investors are more fearful because prices of the options increased and investors are more prone to pay more to preserve their assets. How VIX works By utilising short-term near-the-money put and call options, VIX gauges suggested volatility of S&P stock market index options through the forthcoming 30 days. Media usually quote the VIX because many investors consider the S&P 500 to be a reliable proxy for the entire market. CNN Fear & Greed Index There is also another available index that can gauge greed and fear developed by CNNMoney. This index is based on seven indicators: Safe Haven Demand, Stock Price Momentum, Stock Price Strength, Stock Price Breadth, Put and Call Options, Junk Bond Demand, and Market Volatility. All aforementioned indicators are separately gauged using scales from 0 to 100. A reading from 0 to 49 indicates fear. A reading of 50 is neutral. Readings from 51 to 100 demonstrate that investors are greedy. To calculate this index, a computer takes an equal-weighted average of those seven indicators. See also Behavioural finance Behavioural economics Emotional bias Greed is good Hersh Shefrin S&P 500 VIX References Business terms Stock market Behavioral finance