Historically, there has been an inverse relationship between the VIX and market returns. When the VIX is high, indicating heightened market fear, it is often a signal that the market may be near a bottom. On the other hand, when the VIX is low, it suggests a more bullish sentiment and the possibility of a market top.

• The 0.85% expense ratio accelerates that drag, and because this VIX ETF holds futures, investors also receive a K-1 form at tax time, which can complicate filings.
• Measured this way, the VIX does a good job overall of identifying the forward-looking volatility – for most markets.
• It’s crucial to read the fine print because VIX ETFs are known for unpredictable behavior over time, sharp drawdowns, and complicated tax treatment.
• Downside risk can be adequately hedged by buying put options, the price of which depends on market volatility.
• Let’s examine the VIX, how it’s calculated, and some considerations when using it as a tool to gauge investments.

FAQs on the best VIX ETFs in 2025

The reverse is true when the market advances—the index values, fear, and volatility decline. Yes, UVXY offers 1.5x leveraged exposure to front-month VIX futures, making it more sensitive to daily volatility movements. These products are a niche where both the long and short sides come with the real risk of total wipeout.

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It is important to note that trading the VIX and volatility products can be complex and involves risks. Volatility can be unpredictable, and the VIX itself can experience significant fluctuations. Traders should carefully consider their risk tolerance and have a thorough understanding of the products they are trading before engaging in volatility trading strategies.

CBOE Volatility Index (VIX): an important indicator in the financial markets

Lastly, understanding and interpreting the VIX requires a good grasp of options pricing and market dynamics, which can be challenging for new investors. The VIX index tracks the tendency of the S&P 500 to move away from and then revert to the mean. When the stock markets appear relatively calm but the VIX index spikes higher, professionals are betting that prices on the S&P 500—and thereby the stock market as a whole—may be moving higher or lower in the near term. When the VIX moves lower, investors may view this as a sign the index is reverting to the mean, with what is the spread in forex the period of greater volatility soon to end. One of the most popular and accessible of these is the ProShares VIX Short-Term Futures ETF (VIXY), which is based on VIX futures contracts with a 30-day maturity.

The VIX ifc markets review can help investors gauge market sentiment as well as volatility to identify investment opportunities. As volatility can often signal negative stock market performance, volatility investments can be used to speculate and hedge risk. The most significant words in that description are expected and the next 30 days. The predictive nature of the VIX makes it a measure of implied volatility, not one that is based on historical data or statistical analysis.

• When the VIX is high, it may be an opportune time to consider buying stocks, as market fear and uncertainty often lead to attractive valuations.
• Unlike the three previous ETFs, the ProShares Short VIX Short-Term Futures ETF (SVXY 5.1%) is for investors looking to profit from falling volatility.
• Alternatively, you could adjust your asset allocation to cash in recent gains and set aside funds during a down market.
• The VIX has facilitated the trading of volatility as an asset class through derivative products.
• However, the VIX can be traded through futures contracts, exchange-traded funds (ETFs), and exchange-traded notes (ETNs) that own these futures contracts.

At Aptus, we’ve long advocated for thoughtful volatility strategies, such as owning more optionality during calm markets, and harvesting it when expectations become inflated. Large institutional investors hedge their portfolios using S&P 500 options to position themselves as winners whether the market goes up or down, and the VIX index follows these trades to gauge market volatility. The CBOE Volatility Index—also known as the VIX—is a primary gauge of stock market volatility. The VIX volatility index offers insight into how financial professionals are feeling about near-term market conditions.

It tells us how nervous investors are and how much they’re willing to pay for insurance. While it often overshoots during stressful periods, that overreaction can be a source of return for active investors. Following the popularity of the VIX, the CBOE now offers several other variants for measuring broad market volatility. The VIX attempts to measure the magnitude of price movements of the S&P 500 (i.e., its volatility). The more dramatic the price swings are in the index, the higher the level of volatility, and vice versa. From the close on April 10 to May 12, the VIX slid from 40.72 to less than 20, the level that many consider the delineator between normal and elevated volatility.

Generally, VIX values over 30 indicate significant market fear, while values below 20 suggest a more stable environment. The VIX Index, also known as the Fear Index or the Volatility Index, represents the market’s expectation of future volatility. Developed by the Chicago Board Options Exchange (CBOE), it measures the implied volatility of S&P 500 index options.

CBOE launched the first VIX-based exchange-traded futures contract in March 2004, followed by the launch of VIX options in February 2006. During its origin in 1993, VIX was calculated as a weighted measure of the implied volatility of eight S&P 100 at-the-money put and call options, when the derivatives market had limited activity and was in its growing stages. VIX values are calculated using the CBOE-traded standard SPX options, which expire on the third Friday of each month, and the weekly SPX options, which expire on all other Fridays.

The result is a single number representing the expected annualized change in the S&P 500 index over the next 30 days, expressed as a percentage. For example, a VIX level of 20 suggests an expected annualized volatility of 20%. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward looking statements cannot be guaranteed and all calculations may change due to changes in facts and circumstances.

By gauging market sentiment and potential risk, the VIX aids in making informed trading decisions. Although the VIX itself cannot be traded directly, various financial products allow for exposure to its movements. Just keep in mind that with investing, there’s no way to predict future stock market performance or time the market.

Is there a leveraged VIX ETF?

The lesson for market participants is that the VIX, like any measure based on market prices, is not a crystal ball. Rather, it is more sensitive to equity movement and responds faster than any other estimate of volatility. During normal markets, it provides a reasonably accurate estimate of risk, with an average bias of about three points.

CBOE Volatility Index (VIX): What Does It Measure in Investing?

The 21-day slide was the fastest the VIX has settled back into normal territory in its history going back to 1990, according to a recent analysis from Bespoke Investment Management. For privacy one good trade and data protection related complaints please contact us at Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data. The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) can help you own tech stocks, but with the benefit of higher monthly income. The ProShares VIX Mid-Term Futures ETF (VIXM -3.82%) offers a more tempered alternative to short-term volatility products like the ProShares VIX Short-Term Futures ETF (VIXY).

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. This information is provided for informative purposes only and should not be construed to be investment advice. VIX ETFs are highly advanced, expensive products that often behave in ways counterintuitive to most retail investors. The biggest misunderstanding is that none of these ETFs track the actual spot VIX. They all follow some version of VIX futures, which are correlated to the spot VIX but can behave very differently depending on which contracts are tracked and the shape of the VIX futures curve. The catch is that when volatility spikes — especially suddenly — this inverse ETF can drop sharply.

That means this ETF is designed to rise when VIX futures fall and decline when they spike with double the sensitivity. With a 0.95% expense ratio, it’s also more expensive than non-leveraged VIX ETFs. Add in the frequent reverse splits needed to keep the share price from collapsing, and you have a product that’s strictly for short-term tactical trades, not long-term hedging or investing. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.

While the VIX alone does not determine investment returns, it can be a useful tool in developing investment strategies and managing risk. The VIX is derived from the prices of options on the S&P 500 Index and represents the expected volatility over the next 30 days. It is a forward-looking measure that indicates how much investors anticipate the stock market to fluctuate. The VIX is calculated by combining the weighted prices of put and call options on the S&P 500 Index. The VIX is a good indicator for understanding market volatility and investor sentiment. By measuring expected future volatility, the VIX offers insights into the collective emotions of market participants.

While it has limitations, the VIX remains a valuable tool for risk management, hedging, and market timing. Often referred to as Wall Street’s “fear gauge,” the VIX provides insights into market volatility and investor sentiment. The VIX, formally known as the Chicago Board Options Exchange (CBOE) Volatility Index, measures how much volatility professional investors think the S&P 500 index will experience over the next 30 days. The CBOE Volatility Index (VIX) quantifies market expectations of volatility, providing investors and traders with insight into market sentiment. It helps market participants gauge potential risks and make informed trading decisions, such as whether to hedge or make directional trades.