How to read the VIX: definition, levels, and spikes
Source: Hyperliquid / Last updated: / Perpetual-futures prices are reference values.
The VIX is also called the fear index. It is known as a measure of how much anxiety there is in the market.
This article sets out the definition of the VIX and the general convention on its levels. It also covers what tends to happen when it rises sharply, and the view of reading it alongside prediction-market probabilities.
The meaning of the numbers is general convention throughout. It does not indicate future moves.
What the VIX is
Definition
The VIX is one of the volatility indices. Volatility is the size of price movement. It is calculated by Cboe, the Chicago Board Options Exchange.
The input is S&P 500 option prices. The S&P 500 is the headline U.S. equity index.
The VIX expresses how much movement the market expects over the next 30 days. That figure is annualised.
The VIX is a volatility index calculated from S&P 500 option prices.
It reflects what is ahead, not what has happened
What goes into it is not the movement that actually happened in the past. It is the size of movement priced into options as what is expected from here. That is implied volatility.
So the VIX reflects the degree of unease and caution market participants hold about what is ahead. It works like a mirror.
Not past movement, but the size of movement expected from here.
Why it is called the fear index
Generally, when demand rises for options that guard against a fall, the price of those options rises. The figures behind the calculation get larger, and the VIX tends to rise with them. This movement has long been discussed alongside the strength of investor anxiety, and that is given as the origin of the name.
Conversely, when markets are calm, the VIX tends to be low.
For that reason the VIX is often said to move inversely to share prices. The typical pairing is a sharp fall in equities alongside a jump in the VIX. That too does not hold every time.
It is often said to move inversely to equities, though it does not hold every time.
Level bands, as general convention
There are rough bands often cited for the VIX. What follows is the general convention. It is not a fixed boundary.
| Level | How it tends to be read |
|---|---|
| Broadly below 20 | Read as markets being relatively calm |
| Around 20 to 30 | An intermediate range, seen as caution building somewhat |
| Well above 30 | Read as unease and caution being quite strong |
20 and 30 are conventions, not boundaries.
The direction of change, rather than the number
There is also a way of reading the direction of change rather than the number itself. Is it higher or lower than usual?
The same 20 can be taken differently. A 20 that has risen from calm conditions is not the same as a 20 that has come down from a high level.
The same number is taken differently depending on where it came from.
When the VIX rises sharply
What tends to happen at the same time
There are episodes where the VIX rises a long way in a short time. Generally, these are said to occur alongside it:
- Equity indices are down sharply
- The daily range, the gap between the high and the low, is wider than usual
- Strong words appear in headlines
Large rises of this kind are said to happen most often around unexpected events — economic shocks, geopolitical events and the like.
A fall in equities and a wider-than-usual range tend to be seen at the same time.
A high level does not tell you the direction
A high VIX does not by itself tell you whether the market rises or falls from there. The VIX shows the current strength of caution. It is not a tool for calling direction, and that is worth holding on to.
What the VIX shows is the strength of caution, not the direction that follows.
When conditions settle again
After a high reading, the VIX is also said to come down gradually. Even so, when it settles cannot be seen in advance. Neither can how far it falls.
Neither the timing of the settling nor the level it falls to can be seen in advance.
Reading it alongside prediction-market probabilities
What the VIX does not tell you
The VIX puts the market-wide strength of caution into a single number. It does not tell you the individual themes behind that number — the path of monetary policy, or the possibility of a recession, for example.
Prediction-market probabilities are one reference for that. Prediction-market prices are read as a reference value for the probability of an event occurring. The probability is the pricing of the market participants. It does not guarantee the future.
StockTicker24 does not currently show a prediction-market surface.
The VIX is market-wide caution; a prediction-market probability is a reference value for an individual theme.
How StockTicker24 treats this
Both the level of the VIX and a prediction-market probability are reference information reflecting the market's view at that moment. StockTicker24 does not carry the VIX itself.
The figures StockTicker24 does show for indices and other instruments are reference values. They are based on perpetual-futures prices from offshore derivatives venues. They are not the official index values themselves, and that is worth noting too.
StockTicker24 does not carry the VIX, and the figures it shows are reference values.
Common questions
What is the VIX calculated from?
S&P 500 option prices. It is calculated by Cboe, the Chicago Board Options Exchange.
What does the "30 days" refer to?
The size of movement the market expects over the next 30 days, expressed as an annualised figure.
Why is it called the fear index?
When the price of options that guard against a fall rises, the VIX tends to rise with them. That movement has long been discussed alongside the strength of anxiety.
Are 20 and 30 fixed boundaries?
No. They are rough bands that are often cited, not fixed boundaries.
If the VIX is high, does it come down afterwards?
The VIX shows the current strength of caution. It is not a tool for calling direction.
Can I see the VIX on StockTicker24?
StockTicker24 does not carry the VIX itself.
Summary
- The VIX is an indicator calculated from S&P 500 options.
- It expresses the expected size of movement over the next 30 days, and is also called the fear index.
- The convention is that below 20 reads as calm and well above 30 reads as strong caution.
- That is general convention, and it does not point to a direction.
- When it rises sharply, a fall in equities and large movement tend to come with it.
- Reading it alongside prediction-market probabilities makes the background easier to place.
This article is for information only and is not investment advice.