What is the VIX? It's an index that measures the swings in the S&P 500 ... similar to the Dow Jones. What it specifically measures is the price of options contracts in the S&P.
So if you have a low VIX, it's another way of saying things are going pretty smoothly, but if the VIX goes high, you know there's a lot of volatility and fear in the market.
When the S&P is at a healthy state, it'll usually trade at between 10 to 15. It's former all-time high was in 1998 when it reached 44.28. The reason for that was the Russian default. Today it's measuring at 81, by far the highest level its ever reached. For the last two decades its averaged a little over 22.
The reason today's moves are happening is because options sellers are charging much higher prices to write option contracts. With the huge risk of current swings in the market, they charge the higher premium to offset that risk.
How can a person make money on it? By shorting it.
There are only two things to consider when thinking about this. Either you must know and understand the options market, or have a broker you implicitly trust to help set up the options trade. All you have to do is tell your broker you want to short the VIX.
This is a window of true opportunity that won't be around for a long period of time, so if you're interested, it's something to contact your broker about very soon, or if you know how to trade in options, get into it now. Shorting the VIX is at a prime moment.
VIX Chart
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