What is VIX?
CBOE Volatility Index — 30-day implied volatility of S&P 500 options. The market's "fear gauge".
Definition
The VIX is a forward-looking estimate of S&P 500 30-day realised volatility, derived from the prices of out-of-the-money SPX puts and calls (variance-swap formula). Quoted in annualised volatility points: VIX = 20 means options are pricing ~20% annualised vol, or roughly ±5.8% over the next 30 days at one standard deviation.
Why it matters for trading
- VIX is the cleanest cross-asset risk dial. It moves in advance of (and proportionally to) credit spreads, FX vol, and commodity vol.
- Sub-15 VIX = complacency. Investors are short vol; any shock is amplified by gamma unwind. >25 = stress; >35 = crisis. The transition zones (15→18, 22→25) are where the bias engine flips its risk premium estimate.
- VIX *level* tells you the regime. VIX *velocity* tells you whether risk is repricing right now.