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What Is the Significance of the VIX Index in Relation to Implied Volatility and Market Risk?

The VIX is the "fear gauge," indicating 30-day expected volatility; a high VIX means high implied volatility, wider spreads, and increased slippage risk.
Greeks.Live10.11.25

What Is the Significance of the VIX Index in Relation to Implied Volatility and Market Risk?

The VIX (CBOE Volatility Index) is a real-time index representing the market's expectation of 30-day forward-looking volatility, derived from S&P 500 index options. It is often called the "fear gauge." A high VIX indicates high implied volatility across the board, signaling heightened market risk and uncertainty.

This high implied volatility translates to wider bid-ask spreads in index options and related derivatives, increasing the potential for slippage.

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