VIX

What Is the VIX?

The CBOE Volatility Index (ticker: VIX) measures the market's expectation for 30-day volatility in the S&P 500, derived from the prices of S&P 500 options across a range of strikes and the nearest two expirations. It is expressed as an annualised percentage — a VIX of 20 implies the market expects S&P 500 moves of roughly ±1.25% per day (20 / √252).

How to Interpret VIX Levels

• Below 15: Complacency. Low fear, tight credit spreads, typically a bull market or consolidation phase
• 15–20: Normal market conditions
• 20–30: Elevated uncertainty; caution warranted
• 30–40: Significant stress; 2022 hiking cycle, mini-crises
• Above 40: Crisis territory. GFC (2008): 80+. COVID (March 2020): 85.

VIX as Contrarian Indicator

Extreme VIX spikes are often excellent buying opportunities because they reflect peak panic, not the actual worst outcome. When VIX spikes to 40–50+, forced selling and margin calls have typically already happened. Historically, selling VIX (buying equity) when the index hits 35+ has been profitable over 12-month horizons.

The VIX-S&P Relationship

The VIX has a persistent negative correlation with the S&P 500 — roughly −0.7 to −0.8. When stocks fall sharply, options buyers scramble for put protection, driving implied volatility (and VIX) higher. The reverse — "vol compression" during slow bull markets — occurs when options sellers aggressively write puts.

VIX Term Structure

The CBOE also publishes VIX3M (3-month) and VIX6M (6-month) volatility indices. In normal markets, VIX < VIX3M < VIX6M (contango). When VIX > VIX3M, the curve is inverted — a signal of acute near-term stress, not a lasting regime.