# The VIX

> The VIX measures expected 30 day volatility of the S&P 500 from option prices. Learn how it is calculated, what levels mean, VIX futures and how traders use it.

Source: https://learn.tradelabsai.com/volatility/the-vix/  
Track: Volatility · Level: Intermediate · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "The VIX", https://learn.tradelabsai.com/volatility/the-vix/

The Cboe Volatility Index, known as the VIX, measures the market's expectation of S&P 500 volatility over the next 30 days, derived from the prices of S&P 500 index options. It is quoted in annualised percentage points: a VIX of 20 means options are pricing roughly 20% annualised volatility. Because the VIX tends to jump when stocks fall, it is often called Wall Street's "fear gauge". It is also the basis for actively traded futures, options and exchange traded products.

## How the VIX is calculated

The current methodology, introduced in 2003, does not use any single option or the Black Scholes model. Instead it combines prices of many out of the money S&P 500 puts and calls across a wide range of strikes, for two expiries that bracket 30 days, and interpolates to a constant 30 day horizon. The formula estimates the expected variance of returns, and the VIX is its square root times 100. This approach is closely related to the pricing of variance swaps. See [Variance and Volatility Swaps](https://learn.tradelabsai.com/volatility/variance-and-volatility-swaps/).

## What VIX levels mean

| VIX level | Typical market conditions |
|---|---|
| Below 15 | Calm, steady markets |
| 15 to 20 | Normal |
| 20 to 30 | Elevated concern |
| Above 30 | Stress or panic |
| Above 50 | Extreme crisis (rare) |

The long run average has been around 19 to 20. The VIX closed at a record high of 82.69 on 16 March 2020 during the COVID crash, above its 2008 financial crisis peak of 80.86 in November 2008. See [The COVID-19 Crash](https://learn.tradelabsai.com/history/the-covid-19-crash/) and [The 2008 Financial Crisis](https://learn.tradelabsai.com/history/the-2008-financial-crisis/).

## Converting VIX to expected moves

```
expected 30 day move ≈ VIX / √12
expected daily move ≈ VIX / √252
```

**Example: Reading a VIX of 24**
With the VIX at 24, the market implies a one standard deviation 30 day move of about 24 / 3.46 ≈ 6.9% in the S&P 500, and a daily move of about 24 / 15.9 ≈ 1.5%. In practice, realised moves are often smaller than the VIX implies, because the VIX includes a volatility risk premium. See [Implied Volatility (IV)](https://learn.tradelabsai.com/volatility/implied-volatility/).

## VIX and stock prices

The VIX usually moves opposite to the S&P 500, rising sharply in selloffs and drifting lower in rallies. The relationship is asymmetric: falls in stocks tend to lift the VIX more than equal rises lower it. That pattern reflects demand for downside protection and the volatility skew. See [Volatility Smile and Skew](https://learn.tradelabsai.com/volatility/volatility-smile-and-skew/).

## You cannot buy the VIX directly

The VIX itself is an index calculation, not an asset. Traders get exposure through:

- **VIX futures:** contracts on where the VIX will be at future dates.
- **VIX options:** options on VIX futures values, cash settled.
- **Exchange traded products:** funds and notes that hold VIX futures.

## VIX futures and contango

VIX futures usually trade above the spot VIX when markets are calm (contango) and below it during panics (backwardation). In contango, products that hold short dated VIX futures and roll them monthly lose value over time, as each roll sells cheaper expiring futures to buy more expensive later ones. Long VIX products have historically lost most of their value over long holding periods for this reason. See [Contango](https://learn.tradelabsai.com/futures/contango/), [Backwardation](https://learn.tradelabsai.com/futures/backwardation/) and [Volatility Term Structure](https://learn.tradelabsai.com/volatility/volatility-term-structure/).

**Watch out: Long volatility products decay**
Buying a long VIX exchange traded product and holding it as a hedge can be very expensive over time because of roll costs in contango. These products are designed for short term use.

## Volmageddon

On 5 February 2018, the VIX more than doubled in a single day, from about 17 to about 37. Exchange traded products that were short VIX futures lost most of their value, and one, the VelocityShares Daily Inverse VIX ETN (XIV), lost over 90% and was terminated. The episode showed the risks of short volatility strategies. See [Theta Harvesting](https://learn.tradelabsai.com/options/theta-harvesting/).

## Other volatility indices

Cboe publishes related indices, including VIX9D (9 day), VIX3M (3 month), VVIX (the volatility of the VIX), and volatility indices for the Nasdaq 100 (VXN) and Russell 2000 (RVX).

## How traders use the VIX

- **Sentiment gauge:** very high readings often occur near market lows; very low readings can signal complacency. See [Sentiment Data](https://learn.tradelabsai.com/alternative-data/sentiment-data/).
- **Hedging:** VIX calls can hedge equity portfolios, though their cost and timing are tricky.
- **Strategy selection:** options strategies often depend on the volatility level.
- **Risk management:** position sizes can be scaled down when the VIX is high.

## Frequently asked questions

### What is the VIX?

An index calculated by Cboe that measures expected 30 day volatility of the S&P 500, derived from S&P 500 option prices.

### What is a high VIX level?

Readings above 30 usually signal market stress; the long run average has been around 19 to 20.

### Can I invest in the VIX?

Not directly. Exposure comes through VIX futures, options and exchange traded products, which behave differently from the spot index and can lose value over time.

Next, learn why implied volatility differs across strikes in [Volatility Smile and Skew](https://learn.tradelabsai.com/volatility/volatility-smile-and-skew/).

## Sources

- Cboe, [VIX index](https://www.cboe.com/tradable_products/vix/)

## Continue learning

- Next lesson: [Volatility Smile and Skew](https://learn.tradelabsai.com/volatility/volatility-smile-and-skew/)
- Previous lesson: [IV Rank and IV Percentile](https://learn.tradelabsai.com/volatility/iv-rank-and-iv-percentile/)
- Related: [IV Rank and IV Percentile](https://learn.tradelabsai.com/volatility/iv-rank-and-iv-percentile/): IV rank and IV percentile show where implied volatility sits within its past range. Learn both formulas, how they differ, worked examples and how traders use them.
- Related: [Implied Volatility (IV)](https://learn.tradelabsai.com/volatility/implied-volatility/): Implied volatility is the market's forecast of future movement, backed out from option prices. Learn how to read it, convert it to expected moves and use it.
- Related: [Volatility Term Structure](https://learn.tradelabsai.com/volatility/volatility-term-structure/): The volatility term structure plots implied volatility across expiries. Learn what upward and inverted curves mean, how events show up and how traders use it.
- Related: [Variance and Volatility Swaps](https://learn.tradelabsai.com/volatility/variance-and-volatility-swaps/): Variance swaps pay the difference between realised variance and a fixed strike. Learn how variance and volatility swaps work, how they are priced and their risks.
- Related: [Contango](https://learn.tradelabsai.com/futures/contango/): Contango is when later futures trade above nearer ones or spot. Learn why it happens, how it erodes long commodity and VIX funds, and how traders use it.
- Related: [Sentiment Data](https://learn.tradelabsai.com/alternative-data/sentiment-data/): Sentiment data measures how optimistic or fearful investors are. Learn survey, positioning, options and crypto sentiment indicators and how to use them.