A healthy dose of education about VIX.

The C.B.O.E. created the VIX in 1993 to measure the expectations that options traders had about the volatility, or short-term price movements, of the stock market. The VIX is determined by a complex formula that is based on the assumption that, other things being equal, options will trade for higher prices when expected volatility rises.

The VIX currently stands at 13.42, which is lower than about 79 percent of the index's past readings. Its historical range extends from a low of 9.31 in December 1993, to a high of 45.74 in October 1998.

The exchange refers to the VIX as an "investor fear gauge," and the index quickly found a following among a group of market timers known as contrarians. They believe that the stock market rarely moves in the direction that the majority expects; therefore, they are bullish for the overall market when the VIX is high and indicating widespread investor fear. By the same token, they are bearish when, like today, the VIX is low and betraying investor complacency.

Researchers, however, have been able to find only partial historical support at best for this interpretation of the VIX. According to a recent Hulbert Financial Digest study, the stock market has indeed tended to turn in an above-average performance following very high VIX readings - just as contrarians say. But contrary to what contrarians believe, the stock market has also produced above-average returns following very low readings.