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Volatility, defined

When the price is up, down, and up again so quickly, you can’t keep up (or down).

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🌰 In a nutshell: Volatility is instability in the price of an asset.

πŸ‘Ά Tell a toddler: β€œSome people like to go canoeing on quiet lakes. Other folks like to go whitewater rafting. It all depends on how much you like volatility.”

πŸ’¬ In a sentence: “Investors see more volatility ahead as coronavirus hammers markets”- Axios, April 9, 2020

🌎 IRL: Cryptocurrencies (including Bitcoin) are examples of highly volatile assets. They have uncertain futures and have strong reactions to current events.

πŸ‘ŠWhy volatility matters:

An asset’s volatility will impact how risk-averse individuals approach investment. Need your money to be liquid soon? A highly volatile stock with the possibility of high returns may not be your best bet. But for those looking for long term gains, a volatile asset β€” purchased at the right time β€” could prove profitable. 

πŸ”€ See also: Cboe Volatility Index, or VIX. This measure of the stock market’s likely volatility is based on the S&P 500. If someone asks you if these are volatile times, the VIX can tell you. And as traders say, β€œWhen the VIX is high, it’s time to buy.”