Volatility Index (VIX)
The market's fear thermometer — read it before every trade
Definition
The Volatility Index (VIX) is a real-time market index published by CBOE that represents the market's expectation of 30-day volatility for the S&P 500. Calculated from the prices of SPX options, the VIX is known as the "fear gauge" — rising VIX indicates increasing fear and expected volatility, while low VIX signals complacency. Iron condor traders closely monitor the VIX because higher volatility means wider option premiums and more risk of large price moves.
Example
During the COVID-19 crash in March 2020, the VIX spiked to 85 — an all-time high. Iron condor traders who had sold spreads with narrow wings were stopped out as SPX moved hundreds of points per day. VixShield's ALVH methodology specifically uses VIX levels to adjust condor widths and position sizes in real time.
Related Terms
Frequently Asked Question
What is the VIX?
The VIX measures expected 30-day volatility for the S&P 500, calculated from option prices. Called the "fear gauge," a rising VIX signals market stress. Iron condor traders use VIX to size positions and choose strike widths.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.