What is the VIX?
In one line: The VIX is the Cboe Volatility Index. It uses S&P 500 option prices to show how big the market expects moves to be over the next 30 days.
A simple example
The VIX is quoted as a yearly percent. A VIX of 20 means option traders expect the S&P 500 to move about 20% over a year, up or down.
To see one month, divide by the square root of 12 (about 3.46). So 20 ÷ 3.46 ≈ 5.8%. Traders expect roughly a 5.8% move, either way, over the next 30 days.
That's a rough guide, not a forecast of direction.
What the levels usually feel like
- Low teens: calm markets, smaller daily moves.
- Around 20 to 30: more nervous, bigger swings.
- Above 40: stress. It went above 80 in the 2008 crisis and in March 2020.
It's often called the "fear index," because it tends to jump when stocks fall fast.
Why it matters
The VIX tells you what kind of day to expect. When it's high, prices move further and faster. A stop that fit a calm week may get hit by normal noise.
That's when sizing matters most. Wider swings mean a wider stop, so a smaller position for the same risk. The position size calculator works it out. More on fast days in CPI and FOMC days.
A common mistake
Reading a high VIX as "the market will go down." The VIX measures expected size of moves, not direction. Prices can rally hard while the VIX is high.
You can't buy the VIX itself. Products linked to it, like VIX futures and some ETFs, behave very differently from the index. Learn how they work before you touch them.
Questions
What is a normal VIX level?
In calm stretches it often sits in the teens. It rises when markets get nervous. There's no "correct" level.
Who calculates the VIX?
Cboe Global Markets. It's built from the prices of S&P 500 index options.
Why does the VIX go up when stocks fall?
Sharp drops make people buy protection, like put options (see Put option). That pushes option prices up, which lifts the VIX.
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