Market Structure
What is VIX (CBOE Volatility Index), 'Fear Gauge'?
The CBOE VIX measures the market's 30-day forward-looking expectation of S&P 500 volatility, derived from SPX option prices, popularly known as the 'Fear Gauge' because it spikes during market stress.
Formula
Calculated by CBOE from real-time SPX option bids and offers across multiple strikes and two near-term expirations.
How to Interpret
Below 15 = calm/complacent, 15–20 = normal, 20–30 = elevated, 30+ = stressed, 50+ = panic (last seen briefly during March 2020 COVID crash and 2008 financial crisis). VIX moves inversely to the S&P 500 about 80% of the time. Tradable indirectly via VIX futures, VXX/UVXY ETFs (note: severe contango decay), or SPX/SPY options. India's parallel is India VIX (NSE).
Typical Ranges
Historical median: ~17. Use as a contrarian signal, high VIX often coincides with buying opportunities; low VIX suggests complacency.