Understanding the VIX Index: What is a Panic Index? How should volatility markets be deployed?

The VIX Index (Panic Index) is an important indicator for investment markets that instantly reflects the market's expectations of volatility over the next 30 days. The VIX index tends to rise sharply when global economic uncertainty intensifies. It is not only a thermometer that measures market fluctuations, but also reveals changes in investor sentiment. When the VIX index rises, does the market necessarily fall sharply? What is the relationship between the VIX index and the S&P 500? How should we deploy as the VIX index soars? By watching the VIX index changes, you can help you determine market risk preferences, stay calm in volatile markets, and adjust your strategy to meet challenges.

What is the VIX Panic Index?

VIX Volatility Index, also called the panic index, is given byChicago Options Exchange (CBOE)Created to measure market volatility expectations for the S&P 500 index over the next 30 days. The VIX is known as a panic index because it is able to reflect the fears and uncertainties of the market. It is calculated on a weighted average basis based on the S&P 500 index's bid and subscription option prices over the next 30 days. The higher the VIX value indicates greater volatility in the market; the lower the value indicates that market expectations and sentiment are more stable. For example, when investors are worried about a market fall, they buy morePut Options, pushing the VIX index higher.

Panic Index Live

See the live herd index (VIX) with Futubull

Relationship of the VIX to the S&P 500

In most cases, there is an inverse relationship between the VIX index and the S&P 500 index. When the VIX index rises, the S&P 500 index falls more. This is mainly because the VIX index is based on S&P 500 index option prices, and when investors expect a market fall, they buy more Put Options as a hedge risk and expect to profit in a volatile market, causing the option price to rise and push the VIX index higher.

IN ADDITION, INCREASED MARKET VOLATILITY EXPECTATIONS, REDUCED RISK PREFERENCES, AND INCREASED NEED FOR HEDGES ARE ALSO IMPORTANT FACTORS DRIVING THE VIX INDEX HIGHER. Conversely, when the market stabilizes, investor confidence strengthens, S&P 500 index rises, optionsExtruded Wavelength (IV)Declining, the VIX index fell with it.

To illustrate this inverse relationship more clearly, here is a chart comparing the VIX index with the S&P 500

According to past history, the VIX index surges whenever a major market event occurs, reflecting heightened market concerns.

• 2008 financial crisis: Lehman Brothers went bankrupt in September 2008, global financial markets plunged into turmoil, the S&P 500 fell about 17% in the month, and the VIX index soared to 80.86 in October, setting a then-record high. Market panic prompted investors to sell stocks, move funds to hedge funds such as gold and US Treasuries, and stock market volumes rose sharply and volatility increased.

• April 2025 Tariff War: US Time On April 2, 2025, US President Trump announced the imposition of “equal tariffs” on 86 countries, with global trade tensions and a surge in market risk-averse sentiment. On April 4, the S&P 500 fell nearly 6%. On April 7, Trump imposed further 50% tariffs on China, and the Hang Seng Index fell by 13.22%. The VIX index rose above 50 to hit a five-year high, reflecting the impact of the tariff war on global markets.

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How to interpret the VIX index?

What do you think VIX highs and lows mean? How to tell if the market is overly panicky or overly optimistic? You can focus on the following two key levels:

• VIX INDEX BELOW 20: REFLECTING LOWER MARKET VOLATILITY, STABLE INVESTOR CONFIDENCE, AND A STEADY UPWARD TREND IN THE U.S. STOCK MARKET, WHICH IS GOOD FOR STOCKS TO RISE AND SEIZE UPWARD OPPORTUNITIES.

• VIX Index Above 30: Indicates increased market uncertainty, investors fear intensification, U.S. stock market or higher volatility, reducing high-risk assets, or leveraging VIX-linked ETFs or options to hedge risks.

You can also judge market sentiment from the extreme values of the VIX index:

• Excessive panic: When the VIX index rushes above 50, the market is often in a state of excessive panic. For example, during the outbreak of the COVID-19 pandemic in March 2020, the VIX index soared to 82.69, reflecting the extreme panic in the market. In this case, the stock market may be oversold and there are opportunities for low take-up. In fact, since March 2020, the S&P 500 has rebounded 34%.

• Over-optimism: When the VIX index falls below 15, the market may be overly optimistic and investors remain optimistic about future market movements. For example, the VIX fell as low as 8.56 in 2017, followed by a significant pullback in the market at the beginning of 2018. In this case, the stock market may have overheated and hidden adjustment risks.

Earlier, the VIX index surged above 50, breaking through its highest level since 2020. According to past data, when the market panic sentiment climbs to its peak, it gradually falls back. Sharp short-term fluctuations occur as a result of market panic, which often fall back and rebound.

Practical Application of the VIX: Leveraging Options Hedging in Volatile Markets

In the event of market fluctuations, we can pay attention $CBOE Volatility S&P 500 Index(.VIX.US)$ And can combine holding situations to take advantage ofOptionsAs a hedge.

Suppose you hold a stock and do not intend to leave the market for the time being, you can chooseBuy Long Putas a risk of a sudden drop in the price of the hedge stock; or as an optionShort CallTo offset losses caused by a stock's potential fall by collecting option funds. Of course, there is also the possibility of options being exercised.

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How to buy the US stock VIX?

1. The VIX Index itself cannot be traded directly, but we can invest in ETFs and futures related to the VIX Index.

The VIX Index ETF tracks market volatility by holding VIX futures contracts. SINCE FUTURES CONTRACTS HAVE MATURITY DATES, IT IS NECESSARY TO REGULARLY SELL LOWER-PRICED SHORT-TERM CONTRACTS AND BUY HIGHER-PRICED FUTURES CONTRACTS TO ENSURE THE CONTINUED OPERATION OF THE FUND. Therefore, when holding a VIX ETF, the costs of futures contract reversals will be borne, which will be reflected in the ETF's net asset value.

Just downloadFutubull AppAND OPEN THE ETF PAGE, YOU CAN QUICKLY FIND THE VIX INDEX ETF, AND YOU CAN EASILY DISASSEMBLE BEVEL OR REVERSE ETFS. The following is the VIX Forex Index ETF that can be traded in Futures

How to Trade VIX Index ETFs on Futures?

Step 1: Go online to Futu and sign up for a new account.(Register now)

Step 2: Open an Integrated Account on Futu(Open account now)

Step 3: After logging into the Futubull App, enter your heart VIX index ETF name or code, and set the order type and number of trades, and then click “Buy” to complete the VIX index ETF table. Once the listing is complete, you can go to the Quotation page > Subscription Orders to see the relationship status or modify the order.