What is the VIX?
The CBOE Volatility Index (VIX) measures the market's expectation of 30-day volatility in the S&P 500, derived from options prices. It's often called the "fear gauge" because it spikes when traders buy protective puts.
How to read VIX levels
| VIX Level | Market Mood | What it means |
|---|---|---|
| Below 15 | Complacent | Low fear, steady markets — potential for complacency |
| 15-20 | Normal | Average volatility, typical market conditions |
| 20-30 | Elevated | Increased fear, larger daily swings expected |
| 30-40 | High fear | Significant stress, often during corrections |
| Above 40 | Extreme fear | Crisis levels — seen in COVID crash, 2008 |
Key VIX characteristics
Mean-reverting: VIX always returns toward its long-term average (~18-20)
Inversely correlated to SPY: When SPY drops, VIX typically rises
Asymmetric: VIX spikes faster than it declines — fear is sudden, calm is gradual
Term structure matters: When short-term VIX > long-term (backwardation), fear is acute
VIX-related products
VIXY: Tracks short-term VIX futures (decays over time due to contango)
UVXY: 1.5x leveraged VIX futures — for short-term volatility spikes only
You cannot buy VIX directly: — it's an index, not a tradeable asset
Trading tips
VIX below 13 is a warning sign — extreme complacency often precedes corrections
Don't short VIX blindly — the spikes can be devastating
VIX crush after events — VIX often drops after known catalysts (FOMC, earnings) regardless of outcome