Editing Greed and fear (section)

== How to measure greed and fear ==

One of the best available and accepted tools to measure [[stock market]] volatility is CBOE Volatility Index, elaborated by [[Chicago Board Options Exchange]] in 1993.<ref name="wealthdailyvix">[http://www.wealthdaily.com/resources/vix-index ], Wealthdaily.com, (2014). VIX Index. [online], [Accessed 22 October 2014].</ref> In other words, VIX can 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.<ref>Thompson, S. (2009). Trading secrets. Harlow, England: Financial Times/Prentice Hall.</ref>

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.<ref name="about1">[http://stocks.about.com/od/evaluatingstocks/a/10108VIX.htm] {{Webarchive|url=https://web.archive.org/web/20141031120618/http://stocks.about.com/od/evaluatingstocks/a/10108VIX.htm |date=31 October 2014 }}, Little, K. (2014). Fear Index Can Warn Stock Investors. [online] About.  [Accessed 22 October 2014].</ref> If a VIX reading is under 20 it usually indicates that investors became less concerned;<ref name="wealthdailyvix"/> 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.<ref>[https://www.economist.com/news/economic-and-financial-indicators/21604182-market-volatility?zid=295&ah=0bca374e65f2354d553956ea65f756e0], [[The Economist]], (2014). Market volatility. [online], [Accessed 22 October 2014].</ref>

=== 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.<ref name="about1"/>

=== 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.<ref>[https://money.cnn.com/data/fear-and-greed/], CNNMoney, (2014). Fear & Greed Index – Investor Sentiment – CNNMoney. [online], [Accessed 31 October 2014].</ref>

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.{{Citation needed|date=February 2018}}