The VIX, often called Wall Street's "fear gauge", measures expected stock market volatility over the next 30 days based on S&P 500 options prices.
How it works
The VIX is calculated from the implied volatility of S&P 500 index options. When investors expect large price swings (up or down), they pay more for options as insurance, pushing the VIX up. It's expressed as an annualized percentage.
How to read VIX levels
Below 15: complacency, calm markets. 15-20: normal trading conditions. 20-30: elevated uncertainty. 30-40: significant fear, often during corrections. Above 40: panic, typically during crashes (2008, March 2020, etc.).
What it means for your finances
High VIX = volatile markets ahead. Consider: avoiding leveraged positions, reviewing your emergency fund, and not making panic decisions. Low VIX may signal complacency — a good time to review portfolio risk, rebalance, and ensure you're not overexposed. The VIX cannot predict direction, only magnitude of moves.