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Understanding the VIX and Using it to Your Advantage

by Jon Lewis 06/11/09

That's why the VIX is an important part of our market analysis. It's not a precise measure, but it gives a general view of where market sentiment is headed.

Right now, the VIX is continuing a three-month decline under the pressure of its 20-day moving average. The 30 level is also proving hard to overcome. However, if the index forms a bottom and turns higher, the market may see some short-term weakness.

Even if you don't follow the VIX's daily moves, it's always a good idea to know where it stands on an absolute basis, where it's headed, and whether it's getting ready to form a peak or trough.

For more on the VIX, see:

Jon Lewis is the co-editor of The Winning Edge trading service designed to help you make options profits around corporate earnings and other market events. For more information about Jon, read his bio here.

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