CBOE VIX

History

What the VIX is

The VIX is the market's price for insurance. CBOE computes it from the live prices of S&P 500 options and expresses it as the annualised volatility those prices imply over the coming thirty days. A VIX of 20 means option prices are consistent with roughly a 20% annualised move — about 5.8% over the month ahead.

It is called the fear gauge because it is bought as protection. When investors want downside cover, they bid up puts, and the VIX is the number that falls out. It therefore measures demand for safety at least as much as it measures expected volatility.

How it is built

CBOE takes a strip of near-term and next-term S&P 500 option prices across strikes, computes the variance each implies, and interpolates to a constant thirty-day horizon. No forecast model is involved — it is a price, read off a live market.

DeepValues serves the daily close, sourced from FRED's VIXCLS series with CBOE's own daily history file as the fallback. The page is editorial rather than a trading terminal, so daily close is the right cadence; intraday VIX can swing several points inside a session.

Source: CBOE / FRED VIXCLS · series page

How to read it

Below 12 is complacency, 12–20 calm, 20–30 elevated, 30–40 fear, and 40 and above crisis — a level reached in 2008, in March 2020, and rarely otherwise.

Note that the colour ramp on this page is deliberately not a straight "low is good, high is bad" gradient. The sub-12 band is marked as its own category rather than as the safest one, because historically sustained complacency has preceded volatility expansions rather than calm periods. A very low VIX means protection is cheap, which is information about price, not about safety.

For a long-horizon investor the useful reading is inverted. High VIX means other people are paying up to get out, which is when patient capital has historically been paid best. Low VIX means nobody is worried, which is when the price of being wrong is highest.

What it does not tell you

The VIX is thirty days long and nothing more. It has no view on next quarter, and it mean-reverts hard — a spike is usually most of the way back within weeks. Using it to time anything beyond a month is using it outside its definition.

It is also not directional. A 40 VIX is consistent with a violent rally as well as a crash; it prices the size of the move, not the sign. And because it is derived from option demand, a crowded hedging trade can push it up without any change in the underlying risk.

The other gauges

• Buffett IndicatorTotal US stock market value divided by the size of the US economy.
• Shiller PE (CAPE)The S&P 500 priced against ten years of inflation-adjusted earnings.
• AAII SentimentHow bullish individual investors say they are — the classic contrarian read.
• 10-Year Treasury YieldThe discount rate underneath every valuation on the platform.
• Fed Balance SheetThe liquidity tide — how much of today's price is money rather than business.