JustChartsWhat Is the VIX “Fear Index”? How to Read Volatility
The VIX (Cboe Volatility Index) measures how much volatility the market expects in the S&P 500 over the next 30 days, calculated from S&P 500 option prices. It is nicknamed the “fear index” because it usually jumps when stocks fall sharply. Its long-term average is about 19–20; readings above 30 signal stress, and it closed above 80 in both 2008 and 2020.
Key facts
- Measures
- 30-day expected volatility of the S&P 500
- Calculated from
- S&P 500 option prices
- Long-term average
- about 19–20
- Record closes
- 80.86 (Nov 2008), 82.69 (Mar 2020)
- Rule of 16
- VIX ÷ 16 ≈ expected daily % move
What the number means
The VIX is an annualised percentage. A VIX of 16 means options are pricing roughly a 16% annual move in the S&P 500 — or about 1% a day, because a year has about 256 trading days and √256 = 16 (the “rule of 16”). A VIX of 32 implies roughly 2% daily moves.
Reading VIX levels
| VIX | Typical market mood |
|---|---|
| Below 15 | Calm, often steadily rising stocks |
| 15–20 | Normal |
| 20–30 | Nervous, bigger daily swings |
| Above 30 | Stress or sell-off |
| Above 40 | Crisis conditions |
Why the VIX rises when stocks fall
When markets drop, investors buy put options to protect portfolios, pushing up option prices and therefore the VIX. Rallies tend to be calmer, so the VIX usually drifts lower when stocks rise.
How traders use it
- Risk gauge: high VIX means wider stops and smaller positions are sensible across stocks, indices such as US30, and risk-sensitive currencies.
- Sentiment extremes: spikes often happen near short-term market lows, though they don’t time them precisely.
- Safe havens: rising VIX often coincides with a stronger yen and Swiss franc, and sometimes gold.
Can you trade the VIX?
Not directly — you can trade VIX futures, options and related products. Their prices behave differently from the spot index, and many volatility products lose value over time when markets are calm, so they are generally unsuitable for long-term holding.
Frequently asked questions
What is a high VIX?
Readings above about 30 indicate market stress; above 40 has historically meant crisis conditions. The long-term average is about 19–20.
Why is the VIX called the fear index?
Because it usually spikes when stocks fall and investors rush to buy protection with options.
Does a high VIX mean stocks will go up?
Not necessarily. Spikes often occur near short-term lows, but the VIX can stay elevated during long bear markets.
Put it into practice
Live charts, an economic calendar and trading calculators — free with a JustCharts account.
Open the live VIX chartThis article is for education only and is not financial advice. Trading leveraged products carries a high risk of losing money. Contract sizes, trading hours and leverage limits vary by broker and country — always check your own broker’s specifications.