A key measure of market volatility is gyrating wildly Tuesday after a triple-digit percentage move the previous day.

The CBOE Volatility Index, or VIX, is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. It's sometimes called the "fear gauge."

Volatility refers to the amount of uncertainty in the size (and direction) of changes in a security's value and is typically measured by the deviation of returns.

The VIX surged by 115.6 percent on Monday to 37.32. It rose briefly early Tuesday to over 50, the highest level since Aug 2015. The VIX then dropped to 22.42, rose to over 45, before fading to roughly 35.

One Wall Street veteran predicts the index's wild moves will cause the VIX to go higher.

"The beast inside the market wants to know where the bodies are buried. Where are the other volatility sellers, other victims? Any additional casualties will lead to more short covering in the VIX futures market," ACG Analytics' Larry McDonald wrote in an email Tuesday. "Other markets participants know this and may be trying to take advantage of the pain trade."

Interactive Brokers founder Thomas Peterffy predicted there will be more volatility ahead as traders unwind their bets.

"It is going to, I think, stop … when most of these short options positions [bets against volatility] are covered by the brokers. It is going to be very painful. There will be lots of margin losses," he said Tuesday on CNBC's "Squawk on the Street." "This market is going to move up and down very very nervously. And market makers who have suffered for a long time are going to make a great deal of money next few months or days."

CBOE VIX intraday chart

Source: FactSet

While there is no direct trading in the VIX, it is used by a number of derivative securities including futures and exchange-traded notes as a reference for volatility.

Barclays told its clients Tuesday it estimated Volatility Target funds will sell about $225 billion worth of stocks in the next few days to maintain their portfolio volatility targets.

Tuesday's moves in the VIX comes after a stunning decline of more than 80 percent in after hours trading Monday for the ETN VelocityShares Daily Inverse VIX Short-Term.

XIV is issued by Credit Suisse and is supposed to give the opposite return of the VIX.

Credit Suisse announced on Tuesday the last day of trading for XIV will be Feb. 20. The bank is triggering the liquidation of the product after its price collapse.