# VIX
The VIX (Cboe Volatility Index) is a market estimate of the expected 30-day volatility of the S&P 500 Index, computed in real time from the bid and ask quotes of [S&P 500](https://www.edgepedia.org/s-and-p-500) index options[1](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf). It is widely called the market's "fear gauge," though it measures expected volatility, not fear itself, and it is a non-investable index that does not represent the actual volatility the S&P 500 subsequently realizes[2](https://www.sec.gov/files/dera-vix-working-paper-2504.pdf) • [3](https://www.sec.gov/Archives/edgar/data/1884021/000121390025098831/ea0260999-14_485apos.htm).
| Key fact | Detail |
|---|---|
| Definition | Real-time estimate of expected 30-day S&P 500 volatility, from SPX/SPXW option mid-quotes, annualized[1](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf) • [2](https://www.sec.gov/files/dera-vix-working-paper-2504.pdf) |
| Method | Square root of a 30-day synthetic variance swap rate built from a strip of out-of-the-money puts and calls across all strikes, two expiries between 23 and 37 days weighted to constant 30-day maturity[4](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr867.pdf) • [1](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf) |
| History | Introduced 1993 on S&P 100 at-the-money options; relaunched September 22, 2003 on S&P 500 options with variance-swap pricing after the 1998 LTCM crisis; the old index became VXO[5](https://www.eurex.com/resource/blob/36578/1baafe8647977b991c16f3f62782cc42/data/the-evolution-of-volatility-products.pdf) • [6](https://engineering.nyu.edu/sites/default/files/2019-01/CarrReviewofFinStudiesMarch2009-a.pdf) |
| Reading levels | VIX of 10 implies an expected 30-day S&P 500 range of ±2.9%; VIX of 30 implies ±8.7%[7](https://www.spglobal.com/spdji/en/vix-intro/) |
| Records | All-time high 82.69 in March 2020 (COVID-19); biggest one-day spike on August 5, 2024, up 180% to almost 66 pre-market[7](https://www.spglobal.com/spdji/en/vix-intro/) • [8](https://www.bis.org/publications/bulletin-95-anatomy-vix-spike-august-2024.pdf) |
| Risk premium | VIX overstates subsequent 30-day realized volatility most of the time; the premium is estimated at roughly 4 to 5 percentage points by S&P and about 2.5 points by Concretum (2005–2025)[9](https://cdn.cboe.com/resources/vix/SandP%20A%20Practitioners%20Guide%20to%20Reading%20VIX.pdf) • [10](https://concretumgroup.com/wp-content/uploads/2026/02/The-Volatility-Edge.pdf) |
| Trading | Not directly investable; VIX futures (2004), VIX options (2006), and futures-based ETPs such as VXX, which has lost 95% of its value since 2009[6](https://engineering.nyu.edu/sites/default/files/2019-01/CarrReviewofFinStudiesMarch2009-a.pdf) • [11](https://www.panathea.de/wp-content/uploads/WhitePaper.Volatility.Instruments-and-Strategies.pdf) • [7](https://www.spglobal.com/spdji/en/vix-intro/) |
## What the VIX measures
The VIX answers one question: how much does the options market expect the S&P 500 to fluctuate over the next 30 days[1](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf). It is derived from real-time mid-quote prices of S&P 500 index options (SPX and SPXW)[2](https://www.sec.gov/files/dera-vix-working-paper-2504.pdf). Because it is built from a constantly changing portfolio of options, it is a non-investable index, and it measures implied rather than realized volatility[3](https://www.sec.gov/Archives/edgar/data/1884021/000121390025098831/ea0260999-14_485apos.htm).
## How it is calculated
**From at-the-money to variance swaps.** The original 1993 VIX used the implied volatility of 8 at-the-money [S&P 100](https://www.edgepedia.org/s-and-p-100) options. After the 1998 LTCM crisis, variance swaps, which pay the difference between realized variance and a fixed rate, became widely traded, and it became clear that a volatility index should reflect the whole strike spectrum rather than 8 options[5](https://www.eurex.com/resource/blob/36578/1baafe8647977b991c16f3f62782cc42/data/the-evolution-of-volatility-products.pdf). On September 22, 2003, the CBOE redefined the VIX so that it approximates the 30-day variance swap rate of the S&P 500 index return, changing the underlying from the S&P 100 to the S&P 500 and renaming the old index VXO[6](https://engineering.nyu.edu/sites/default/files/2019-01/CarrReviewofFinStudiesMarch2009-a.pdf) • [5](https://www.eurex.com/resource/blob/36578/1baafe8647977b991c16f3f62782cc42/data/the-evolution-of-volatility-products.pdf).
**The replication logic.** A variance swap costs zero to enter, so its fixed rate equals the risk-neutral expected value of future realized variance[6](https://engineering.nyu.edu/sites/default/files/2019-01/CarrReviewofFinStudiesMarch2009-a.pdf). The VIX equals the square root of a one-month synthetic variance swap rate computed from S&P 500 index option prices via the no-arbitrage variance swap pricing formula[4](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr867.pdf). This is why the index is not a simple average of implied volatilities: the Carr–Madan (1998) static replication approach prices a portfolio of options across all strikes, whose payoff replicates variance[12](https://link.springer.com/article/10.1007/s11147-022-09190-2).
**The option strip.** Only SPX options with more than 23 days and less than 37 days to the Friday expiration are used; near-term and next-term options are weighted to yield a constant 30-day maturity, so the option portfolio changes slightly every minute[1](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf). Conceptually, the formula computes a weighted average implied volatility across the active strike spectrum of two S&P 500 option expiries, involving hundreds to thousands of component calculations[13](https://cdn.cboe.com/resources/vix/VIX-Decomposition-2025-08-01.pdf).
**A known limitation.** The Carr–Madan replication requires a continuous set of strikes from 0 to infinity; traded strikes are discrete, so the implementation introduces systematic errors[12](https://link.springer.com/article/10.1007/s11147-022-09190-2).
## By the numbers
[S&P Dow Jones Indices](https://www.edgepedia.org/s-and-p-dow-jones-indices) describes interpretation bands: 0–15 as low or optimistic, 15–20 as normal, 20–25 as growing concern, 25–30 as turbulence, and above 30 as extreme turbulence[7](https://www.spglobal.com/spdji/en/vix-intro/). A common practitioner rule treats VIX below 12 as low and above 20 as high[9](https://cdn.cboe.com/resources/vix/SandP%20A%20Practitioners%20Guide%20to%20Reading%20VIX.pdf).
The level translates directly into an expected move. A VIX of 10 implies a deannualized 30-day expected S&P 500 range of ±2.9%; a VIX of 30 implies ±8.7% over 30 days[7](https://www.spglobal.com/spdji/en/vix-intro/). Historical distributions show the VIX has been somewhat predictive of the subsequent magnitude of 30-day S&P 500 changes[9](https://cdn.cboe.com/resources/vix/SandP%20A%20Practitioners%20Guide%20to%20Reading%20VIX.pdf).
**Extremes.** In March 2020, during the COVID-19 crisis, the VIX closed at a record high of 82.69; in the winter of 2013, with stock prices high, it hovered around 12[7](https://www.spglobal.com/spdji/en/vix-intro/). On August 5, 2024, before the US market open, the S&P 500 had fallen nearly 5% as traders processed a 12% overnight decline in the Nikkei tied to the yen-carry unwind, and the VIX jumped from a prior close of 23 to an intraday preopen high of 65 before closing near 40[13](https://cdn.cboe.com/resources/vix/VIX-Decomposition-2025-08-01.pdf). The BIS dates the same episode as the index's biggest ever one-day spike, an increase of 180% to almost 66 pre-market, exceeding spikes during the 2008 crisis and March 2020[8](https://www.bis.org/publications/bulletin-95-anatomy-vix-spike-august-2024.pdf).
## Why the VIX exceeds realized volatility
The VIX reflects a risk-neutral expectation of future return variance, shaped by the price of insurance rather than by a forecast. Because of persistent demand for option insurance, the VIX more often than not overstates the actual volatility experienced over the next 30 days; S&P estimates this premium at around 4 to 5 percentage points on average[9](https://cdn.cboe.com/resources/vix/SandP%20A%20Practitioners%20Guide%20to%20Reading%20VIX.pdf). A 2005–2025 study puts the overestimate at roughly 80% of the time with an average premium of about 2.5 volatility points[10](https://concretumgroup.com/wp-content/uploads/2026/02/The-Volatility-Edge.pdf).
The gap has a name, the variance risk premium: the difference between the ex-ante risk-neutral expectation of future return variation and the ex-post realized variance[14](https://www.federalreserve.gov/pubs/feds/2007/200711/). Bekaert and Hoerova decompose the squared VIX into the conditional variance of stock returns and this equity variance premium[15](https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1675.pdf).
The premium is not free money. During sharp corrections, including the 2008 global financial crisis, the 2011 [European debt crisis](https://www.edgepedia.org/european-debt-crisis), the 2018 Volmageddon, the 2020 COVID-19 shock, and the 2025 tariff war escalation, realized volatility surged past the VIX, causing losses for investors who had sold volatility[10](https://concretumgroup.com/wp-content/uploads/2026/02/The-Volatility-Edge.pdf).
## How it compares with other volatility indices
Cboe calculates a family of siblings on the same S&P 500 underlying: VIX9D (9-day), VIX3M (3-month), VIX6M (6-month), and VIX1Y (1-year), plus indices on other US underlyings, VXN ([Nasdaq-100](https://www.edgepedia.org/nasdaq-100)), VXD (DJIA), and RVX (Russell 2000)[16](https://www.math.wustl.edu/~victor/classes/ma4560/vixwhite.pdf). Comparing VIX9D with VIX3M or VIX6M reveals the term structure of implied volatility.
In Europe, the VSTOXX family measures the volatility of the EURO STOXX 50 implied by Eurex-listed options, with 8 sub-indices covering the next 1, 2, 3, 6, 9, 12, 18, and 24 month expiries and 12 main indices spanning 30 to 360 days in 30-day increments[17](https://www.stoxx.com/document/Bookmarks/CurrentFactsheets/V2TX.pdf). Like the VIX, VSTOXX exploits the whole option strike spectrum and expresses each sub-index as the fair delivery price of future volatility in a variance swap, in annualized terms[17](https://www.stoxx.com/document/Bookmarks/CurrentFactsheets/V2TX.pdf).
## Trading and using the VIX
**Instruments.** The VIX itself cannot be invested in or replicated directly[7](https://www.spglobal.com/spdji/en/vix-intro/). The CBOE Futures Exchange launched VIX futures on March 26, 2004, and VIX options followed in 2006[6](https://engineering.nyu.edu/sites/default/files/2019-01/CarrReviewofFinStudiesMarch2009-a.pdf) • [4](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr867.pdf). Futures were originally monthly and cash settled, with weekly futures added in 2015[11](https://www.panathea.de/wp-content/uploads/WhitePaper.Volatility.Instruments-and-Strategies.pdf). The final settlement value is determined on the morning of expiration (usually a Wednesday) through a Special Opening Quotation (SOQ) of the VIX Index, based on a special opening auction concluding at 8:30 a.m.[16](https://www.math.wustl.edu/~victor/classes/ma4560/vixwhite.pdf) • [1](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf). Unlike the regular index, the SOQ uses options from a single expiration 30 calendar days from the settlement day, with no interpolation between expiries[16](https://www.math.wustl.edu/~victor/classes/ma4560/vixwhite.pdf). Barclays introduced the VIX-based ETNs VXX and VXZ in January and February 2009[11](https://www.panathea.de/wp-content/uploads/WhitePaper.Volatility.Instruments-and-Strategies.pdf).
**Roll decay.** VIX-linked ETP returns follow VIX futures, not spot VIX[7](https://www.spglobal.com/spdji/en/vix-intro/). When each new futures contract costs more than the one it replaces (contango), the recurring month-by-month loss can sap a significant portion of an investor's principal in a single year, making these products suitable only as very short-term holdings[7](https://www.spglobal.com/spdji/en/vix-intro/). VXX has lost 95% of its value since inception, mostly due to contango[11](https://www.panathea.de/wp-content/uploads/WhitePaper.Volatility.Instruments-and-Strategies.pdf). One mechanical point is often misunderstood: the roll itself has no direct effect on VXX's value; contango can contribute to losses over time[11](https://www.panathea.de/wp-content/uploads/WhitePaper.Volatility.Instruments-and-Strategies.pdf).
**Hedging.** The VIX generally tends to be inversely correlated with the S&P 500, so long volatility exposure may offset falling stock prices and provide diversification[1](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf). S&P's practitioner framework estimates an "expected VIX" as Recent Volatility + MR Adjustment + Volatility Premium, exploiting mean reversion in realized volatility to judge whether the current level is rich or cheap[9](https://cdn.cboe.com/resources/vix/SandP%20A%20Practitioners%20Guide%20to%20Reading%20VIX.pdf).
**Volmageddon.** On February 5, 2018, the VIX spiked intraday by over 100%. Hedging by the inverse ETP XIV produced a 97% one-day loss, and the ETP was terminated the next day[11](https://www.panathea.de/wp-content/uploads/WhitePaper.Volatility.Instruments-and-Strategies.pdf).
## Recent developments
**0DTE options.** Zero-days-to-expiry SPX options accounted for more than 50% of SPX options trading volume in August 2023, up from 5% in 2016[18](https://www.bis.org/publications/what-could-explain-recent-drop-vix). A natural hypothesis was that this growth depressed the VIX, which stayed below its long-term average of around 20 for most of 2023. BIS analysis concludes that 0DTE growth did not, on net, lure activity away from one-month options and is unlikely to be the main explanation for the low VIX[18](https://www.bis.org/publications/what-could-explain-recent-drop-vix). BIS instead proposes that dealers' dynamic hedging of yield-enhancing structured products dampens volatility and depresses the index[18](https://www.bis.org/publications/what-could-explain-recent-drop-vix).
**The August 2024 spike, dissected.** BIS found that less liquid put options, which have an outsize impact on the VIX calculation, accounted for more than 85% of the August 5, 2024 spike, driven by market makers widening bid-ask spreads; VIX ETFs, dealer option hedging, and dispersion trades did not contribute meaningfully[8](https://www.bis.org/publications/bulletin-95-anatomy-vix-spike-august-2024.pdf). Because the VIX is based on quotes rather than trades, pre-market readings may be less informative than regular-hours readings[8](https://www.bis.org/publications/bulletin-95-anatomy-vix-spike-august-2024.pdf). Cboe verified after the spike that the VIX priced exactly in accordance with its stated methodology and introduced a decomposition framework distilling VIX movements into 6 principal components[13](https://cdn.cboe.com/resources/vix/VIX-Decomposition-2025-08-01.pdf).
## References
1. [CFTC regulatory filing on VX options and the VIX Index](https://www.cftc.gov/filings/orgrules/rules0912245852.pdf)
2. [Demystify the Surge in VIX (SEC DERA working paper)](https://www.sec.gov/files/dera-vix-working-paper-2504.pdf)
3. [SEC fund prospectus filing on VIX](https://www.sec.gov/Archives/edgar/data/1884021/000121390025098831/ea0260999-14_485apos.htm)
4. [Equity Volatility Term Premia (Cheng), FRB New York Staff Report No. 867](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr867.pdf)
5. [The Evolution of Volatility Products (Eurex)](https://www.eurex.com/resource/blob/36578/1baafe8647977b991c16f3f62782cc42/data/the-evolution-of-volatility-products.pdf)
6. [Variance Risk Premia (Carr and Wu), The Review of Financial Studies, March 2009](https://engineering.nyu.edu/sites/default/files/2019-01/CarrReviewofFinStudiesMarch2009-a.pdf)
7. [VIX | S&P Dow Jones Indices](https://www.spglobal.com/spdji/en/vix-intro/)
8. [Anatomy of the VIX spike in August 2024 (BIS Bulletin 95)](https://www.bis.org/publications/bulletin-95-anatomy-vix-spike-august-2024.pdf)
9. [S&P DJI: A Practitioner's Guide to Reading VIX](https://cdn.cboe.com/resources/vix/SandP%20A%20Practitioners%20Guide%20to%20Reading%20VIX.pdf)
10. [The Volatility Edge (Concretum)](https://concretumgroup.com/wp-content/uploads/2026/02/The-Volatility-Edge.pdf)
11. [White Paper: Volatility Instruments and Strategies (Panathea)](https://www.panathea.de/wp-content/uploads/WhitePaper.Volatility.Instruments-and-Strategies.pdf)
12. [Asymptotic extrapolation of model-free implied variance (Review of Derivatives Research)](https://link.springer.com/article/10.1007/s11147-022-09190-2)
13. [Cboe VIX Index Decomposition (August 2025)](https://cdn.cboe.com/resources/vix/VIX-Decomposition-2025-08-01.pdf)
14. [Expected Stock Returns and Variance Risk Premia (Bollerslev, Tauchen, Zhou), FRB FEDS 2007-11](https://www.federalreserve.gov/pubs/feds/2007/200711/)
15. [The VIX, the variance premium and stock market volatility (Bekaert and Hoerova), ECB Working Paper No. 1675](https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1675.pdf)
16. [Cboe White Paper: The VIX Index (Beyond the VIX Index)](https://www.math.wustl.edu/~victor/classes/ma4560/vixwhite.pdf)
17. [VSTOXX Index Factsheet (STOXX)](https://www.stoxx.com/document/Bookmarks/CurrentFactsheets/V2TX.pdf)
18. [What could explain the recent drop in VIX? (BIS)](https://www.bis.org/publications/what-could-explain-recent-drop-vix)
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*Initially written Sep 17, 2026 · Reviewed: Sep 30, 2026; Oct 10, 2026 · Edited: Sep 30, 2026; Oct 10, 2026; Oct 11, 2026; Oct 15, 2026 · Last review: Oct 10, 2026*
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