Markets are priced by people, and people swing between two emotions: the fear of losing money and the greed to make more of it. The CNN Fear & Greed Index is an attempt to compress that emotional state into a single number between 0 and 100 — 0 being maximum fear, 100 being maximum greed, 50 being neutral. It is one of the most-watched sentiment gauges in retail and professional finance, and one of the most misunderstood.

The Cboe Volatility Index is the most quoted and least understood number in financial markets. It is cited daily as the market’s “fear gauge,” yet most of the commentary surrounding it treats the index as a sentiment poll rather than what it actually is: a precise, formula-driven measurement of the price of insurance on the S&P 500. Understanding the distinction is the difference between using the VIX as a tool and being used by it.