VIX (VIX)

The VIX — short for Volatility Index — does not track the S&P 500's price directly. Instead, it tracks how much traders are paying for options on that index. Options are contracts that give the buyer the right to buy or sell at a set price; when fear rises, demand for protective options rises, and so does the VIX. It is quoted as an annualized percentage, so a VIX reading of, say, 20 implies the market expects roughly 20% annualized swings in the S&P 500 over the next month.

Historically, the VIX has spiked during periods of acute stress — the 2008 financial crisis saw it surge to extreme levels — and drifted lower during calm, trending markets. Traders often describe it as a measure of market sentiment: a rising VIX typically signals anxiety, while a low VIX signals complacency. You can track related sentiment signals on the indicators page.

Because the VIX reflects implied volatility, it is forward-looking, not a record of what already happened. This is a key distinction: realized volatility tells you what swings occurred; the VIX tells you what the options market is pricing in for the weeks ahead.

A common misconception is that the VIX predicts market direction. It does not. It measures the expected size of moves, not whether those moves will be up or down. For context on how sentiment indices like the VIX fit into broader market reading, see What Is Volatility and Risk-On / Risk-Off.