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Finance GlossaryVIX (Volatility Index)
VIX (Volatility Index)
Definition of VIX (Volatility Index)
The VIX, often called the “fear index,” measures market expectations of near-term volatility based on options pricing. When the VIX rises sharply, it indicates increased investor anxiety, such as during market crashes or geopolitical events, while a low VIX suggests stable and confident market conditions.
Related Terms
Short Squeeze
A short squeeze takes place when the price of a stock rises sharply, which forces short sellers to buy the shares to keep losses low. This sudden buying results in more upward pressure. This pushes the prices even higher. Often, short squeezes occur in stocks that are heavily shorted, and can lead to volatile price movements.
Equilibrium Price
Equilibrium price is achieved when the demand is exactly equal to the supply. It is a state where buyers and sellers have enough goods and services to meet each other’s demands - not more, not less. One could say that equilibrium price is a perfectly balance state in the market.
Carrying Charge
Carrying charge or cost of carry is the money involved in the upkeep or general holding of an asset or financial instrument. Examples of carrying charges include maintenance costs, insurance, and others.
A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.
A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.
Pump and Dump
Pump and dump is a type of stock market manipulation. It involves artificially inflating the price of a stock (the pump) through false positive statements, often via social media or email spam, and then selling the cheaply acquired stock (the dump) once the price has increased because of the resulting buying frenzy. Common in Indian penny stocks with poor liquidity. SEBI actively monitors and penalises these manipulations. Investors should avoid tips and conduct their own independent research before making investment decisions.
T-Plus Settlement (T+1)
T-Plus Settlement is a settlement system in trading. The fund transfer takes place one business day after the trade. For instance, if you buy a stock on Monday, the transaction is completed on Tuesday. The T+1 system reduces risk in settlements and improves liquidity. It ensures that investors can access their money on securities faster.
Shooting Star
A shooting star refers to a bearish candlestick pattern that appears after an uptrend. This pattern has a small body close to the low in a day, and a long upper wick. This shows that buyers pushed the prices up, but by the close, sellers took control over the stock. A shooting star often points to a possible trend reversal or short-term weakness.
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