VIX (Volatility Index)

The VIX is an index of how much investors expect the market to swing in the near future. It is derived from the prices of S&P 500 index options, backing out the expected move over the next 30 days. People often call it the fear index.

A sense of the scale changes how you read headlines. In calm markets the VIX generally sits between 12 and 20. Above 20 signals rising anxiety, and above 30 is a fear regime. During the COVID shock in March 2020 it went past 80.

The key point is that the VIX measures size, not direction. It answers how violently prices might move, not which way. Because volatility tends to spike when stocks fall hard, it usually ends up moving opposite to the market in practice.

So a soaring VIX means the market is frightened, not that a bottom is in. Also, the VIX is an index you cannot buy directly, and products tracking it lose value over time from the cost of continuously rolling futures contracts. It is not a hedge a beginner should reach for casually.