VIX

The VIX is calculated by Cboe from the prices of options on the S&P 500 index. Option prices reflect how much movement buyers and sellers expect, so the VIX turns those prices into a single figure for expected volatility over the next 30 days, expressed as an annualised percentage.

It is often called the "fear gauge" because it tends to rise sharply when shares fall quickly and investors pay up for protection, and to drift lower in calm, rising markets.

Example

A rough rule of thumb converts the annual figure into a monthly one by dividing by the square root of 12 (about 3.46). Illustrative figures:

• VIX at 15: 15 ÷ 3.46 ≈ 4.3%. The options market is pricing a one-standard-deviation move in the S&P 500 of about 4.3% over the next month.
• VIX at 30: 30 ÷ 3.46 ≈ 8.7%, roughly twice the expected range.

That is not a forecast of direction, only of the size of moves the market is pricing.

Why forex and CFD traders watch it

• Risk sentiment. A rising VIX often coincides with "risk-off" moves: demand for safe havens such as the yen and Swiss franc, and pressure on currencies like the Australian dollar.
• Trading conditions. Periods of high VIX usually come with wider spreads, larger daily ranges and more slippage, which affects stop placement and position size.
• Index CFDs. Moves in the VIX are closely tied to the S&P 500 itself, so those trading index CFDs see it reflected directly.

Common misconception

You cannot buy the VIX itself. Products that track it use VIX futures, which behave differently from the index and are affected by contango, so they can lose value over time even when the index ends up where it started. Our guide to trading index CFDs covers the underlying market.