VIX Fear Index: what is it and why do traders closely monitor it?

2025-11-29 03:01:00

Abstract generation in progress

Heard about VIX and think it's some kind of magic? Actually, it's quite simple.

Briefly about the main points

VIX is a volatility index based on S&P 500 options. When the market panics and falls, people massively buy put options for protection, their prices rise, and VIX soars. When everything is calm, VIX sits around the 10-25 point mark.

Basic formula: The stock market falls ↓ → Demand for put options increases ↑ → VIX jumps to 40, 60, 80+ points

How does it work technically?

VIX is calculated based on options with expiration terms of 23-37 days. It is a hybrid of traditional options (the third Friday of each month) and weekly options. Since prices are constantly changing, manual calculation is impossible. Everything is done automatically.

Key point: VIX and S&P 500 move in opposite directions. This is not a coincidence, but the mathematics of options.

How is it used?

Traders hedge their portfolio using VIX futures, options, or specialized ETFs. But be careful — these instruments are associated with serious risks and are not for beginners.

Historical fact: During the 2008 crisis, the VIX exceeded 80 points. In spring 2020, (COVID) — the same. This index is not just a measure of fear, but of panic.

Besides the S&P 500, CBOE has VIX for Dow Jones, Russell 2000, NASDAQ — in short, for all major indices.

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