The CBOE Volatility Index — a real-time measure of the market's expectation for S&P 500 volatility over the next 30 days, derived from options prices and widely known as the "fear gauge."
The VIX is calculated by the CBOE using a formula that aggregates implied volatilities of S&P 500 options across multiple strike prices and the two nearest expiration dates. It is expressed as an annualized percentage. A VIX of 20 means the market expects the S&P 500 to move roughly ±20% over the next year, or about ±5.8% over the next month.
Because the VIX spikes during fear and market stress, it is called the "fear gauge." Historically VIX below 15 signals calm, complacent conditions; 15–25 is normal to mildly elevated; 25–35 indicates significant anxiety; readings above 40 are reserved for genuine panic — the financial crisis (VIX hit 80 in 2008) and the COVID crash (VIX hit 82 in March 2020). After extreme spikes the VIX mean-reverts relatively quickly.
The VIX cannot be directly invested in — it is a calculation, not an asset. VIX futures and ETPs like VXX attempt to track it but suffer from significant roll costs because the VIX futures curve is typically in contango, causing long-VIX positions to bleed value steadily during calm markets.
This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.