Volatility indices are financial instruments that measure the market's expectation of future volatility, often derived from options prices. They provide insights into how much the market anticipates price fluctuations in underlying assets, such as stocks or commodities. A common example is the VIX, which reflects expected volatility in the S&P 500 index. Traders and investors use volatility indices to gauge market sentiment and make informed decisions. High volatility readings typically indicate uncertainty or fear in the market, while low readings suggest stability. These indices can be traded directly or used as a tool for hedging against potential market movements.