See: Implied Volatility.
Implied volatility measures the likelihood that a particular price will make a big move in the near future. It's like a consensus opinion about how far a price is likely to move in a given time frame.
The measure is helpful in making investment decisions. Times with high volatility mean big swings...high risk, potentially high reward. Low volatility is like sailing with no wind: calm waters, but it's hard to get anywhere.
There are a few indexes that measure implied volatility. The most famous is the VIX. The VolDex index (official name: the Nations Large Cap VolDex Implied Volatility Index) is another alternative. The VolDex index uses a different formula for determining implied volatility than the VIX. It focuses on at-the-money options for the SPY (the S&P 500 index), while the VIX uses all options. Despite the different underlying basis, the VIX and the VolDex move in almost lock-step with each other, making either a worthwhile way to track implied volatility.
Related or Semi-related Video
Finance: What is Volatility?77 Views
In finance allah shmoop what is volatility beta this thing
that's the symbol for volatility on the street we mean
the wall one not the mean one and it is
so commonly used that the in crowd members just say
beta when they're referring to volatility unless they're from tennessee
in which case they say you ve all y'all all
right so here's a siri's of stock prices stamped each
day that has lo ve all or low beta and
here's a siri's that has high beta dead man's pulse
versus rocky mountains Well what makes a stock volatile uncertainty
Think about it this way If everyone knew for sure
what a given stocks earnings would be for the next
ten years quarter by quarter and they also knew what
the overall markets average earnings would be in a few
other things like revenue growth and world conditions and we're
going to be war inflation there wouldn't be a lot
of guesswork The quote right unquote price today would be
thirty two dollars eighty three cents and the quote right
unquote rate of compounding would be eight percent in the
stock would slowly go up but this rate but in
non disney land riel life well nobody really knows much
of anything So stockcharts look like this and nerve endings
of wall street traders look like this Neither of them 00:01:19.771 --> [endTime] looked much like this chart So that's all you
Up Next
How does duration affect bonds (risk and volatility)? The longer the duration, or length of maturity in bonds, the greater the exposure that econom...
What is the U.S. Mint? The U.S. Mint is the only authorized company that can produce coins of US currency. The U.S. mint has coin production facili...
What is the Black Scholes Model? The Black Scholes Model is used to determine the price of call options. It looks at the change in stock price over...