This measure of wild and wacky swings on the stock market hit an all-time high in October.

"Now we're in uncharted territory," Bruce Rader, an assistant finance professor at Temple University, said yesterday.

The volatility index, or VIX, is a measure of predictions of future volatility in the market - remember those days last month when the Dow Jones average rose and fell by huge amounts - down 733 points one day, up 401 points the next?

All through the year, the VIX hovered in the 20 percent to 30 percent range, but then in September, it rose to a whopping 40 percent of what might be considered normal.

"That was considered outrageous," Rader said.

Then, on Oct. 24 - a day that world markets took what seemed like a coordinated nose-dive, and the 79th anniversary of the 1929 stock market crash - the VIX reached an all-time high of 89.53 percent. Yesterday it closed at 59.89 percent.

"Going up to the 80s and 90s is unheard of," Rader said. "It is a measure of how much people have panicked."

So what is the VIX?

It's complicated, says James Jablonski, a finance professor at Villanova University and former professional trader.

The VIX is a formula created by some mathematical jiggering based on all the prices of all the options of all the stocks on the Standard and Poor's 500 index, he said.

It factors in various timing scenarios, or what its creators on the Chicago Board Options Exchange like to call "the whole volatility skew."

Most of us buy and sell shares of stocks. Some people also trade in options - the right to buy or sell shares at some future price.

Options can be an investment, but many people think of them as a way to hedge their losses.

If you are worried about the price of your shares going down, you can buy the right to sell them at a higher price, even if the shares fall. That protects your investment.

It's like buying insurance on your $20,000 car - you pay a premium in case you get into a wreck. As long as you survive, all you've lost is the premium and deductible.

The more likely you are to crash your car - or the more likely it appears that share prices will fall - the more you'll pay for your car insurance premium, or your "put" stock option.

But the VIX takes a wider view of the market, based on the S&P 500. The more crazy up-and-down swings there are, the more people hedge their bets out of legitimate fear and the more they are willing to spend for these options.

As the market careened in October, there was a lot of option buying going on, with an average of 16.6 million contracts traded per day. By contrast, five years ago, the October average was 4.2 million.

This year, for the first time, three billion contracts were sold in a single year. That happened Oct. 20.

"People are a lot more willing to pay for insurance in the marketplace with the underlying asset moving abruptly," Jablonski said.

Traders, who will bet on anything, actually make trades on the VIX itself.

Rader says the VIX acts as another forecasting tool. To him, the high VIX, now mitigating, signals a bottom. "When there is blood on the streets, it's time to buy," he said. "So now we're up to our throats in blood."

Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.