Definition
The VIX is a benchmark index that gauges how much volatility the market expects in the S&P 500 over the next thirty days. It is calculated from the prices of a broad range of S&P 500 index options, so it reflects collective expectations rather than any single forecast.
The VIX is often called the "fear gauge" because it tends to rise sharply when investors grow anxious and option premiums climb, and to fall when markets are calm and confident.
Why it matters
How it works
Rather than tracking the past, the VIX is forward-looking: it is derived from the implied volatility embedded in current S&P 500 option prices. When demand for protective options surges, those premiums rise, and the VIX rises with them.
Historically, a VIX near the low teens reflects a calm market, while readings above thirty indicate significant turbulence. Traders treat the level as context — a high VIX warns that options across the market are richly priced, while a low VIX suggests the opposite. The VIX itself can also be traded through futures and options.