While most traders focus on the VIX, sophisticated volatility traders watch VVIX—the volatility of volatility itself. This second-order indicator can add useful context on market regime changes alongside the VIX.
What is VVIX?
VVIX measures the expected volatility of the VIX index over the next 30 days. Calculated from VIX options prices, it essentially tells us how uncertain the market is about future volatility. About three-quarters of VVIX closes since 2006 fall between 80 and 120, and the only close above 200 came in March 2020.
Think of it this way: VIX measures fear, VVIX measures confusion about that fear. When VVIX is elevated, markets are unsure whether current volatility will persist or reverse. This uncertainty itself becomes tradeable information.
VVIX as a Market Timing Tool
VVIX extremes often mark volatility regime turning points. Closes above 140 are rare, about 1% of sessions since 2006, and cluster in a few stress episodes. The VIX was lower ten sessions later in roughly nine of ten of those cases.
Conversely, VVIX below 80 indicates complacency about volatility—markets expect smooth sailing ahead. These periods can precede volatility expansions, but they are common (about 18% of sessions), so a low reading alone is not a timing signal.
The VVIX/VIX Ratio
The ratio of VVIX to VIX provides valuable context. The median ratio since 2006 is about 5.5 (VVIX at 100, VIX at 20 gives ratio of 5). Extremes mostly reflect the VIX level: ratios above 7 tend to appear when the VIX is very low, and ratios below 3 appear during spikes, with a median VIX of about 36, rather than before them.
Trading VVIX Signals
You can't trade VVIX directly, but its signals inform VIX strategies. When VVIX spikes above 140 with VIX above 30, consider selling VIX calls or buying put spreads. The extreme uncertainty typically resolves toward mean reversion.
When VVIX drops below 80 with VIX below 15, accumulate cheap VIX calls. Low VVIX indicates options are underpricing potential volatility expansion. This combination is not a reliable timing signal: it occurred on about 10% of sessions since 2006, and VVIX stayed above 90 in the month before both the February 2018 and March 2020 spikes.
VVIX During Crisis Periods
VVIX behavior during crises reveals market psychology. On March 16, 2020, VVIX closed at 207.59, the highest close on record. This extreme indicated complete uncertainty about pandemic impacts. VVIX and the VIX set their closing peaks on the same day, so VVIX gave no advance signal of the top.
During the 2008 financial crisis, VVIX peaked near 135 in October and averaged about 100 from mid-September through December, not far above its long-run average of about 93, even as the VIX stayed extreme. VVIX tracks uncertainty about the VIX, not the level of fear itself.
Common VVIX Misconceptions
Many believe high VVIX always means buy volatility. Wrong. Extreme VVIX often marks exhaustion points where volatility sellers emerge. The key is combining VVIX with VIX levels and term structure for complete context.
Another mistake: ignoring VVIX during calm markets. Low VVIX during low VIX periods signals dangerous complacency. These are precisely when tail hedges are cheapest and most needed.
A useful way to think about VVIX: when it spikes, the options market is signalling uncertainty about future volatility itself. That uncertainty often surrounds major turning points rather than trend continuation.
Used alongside VIX levels and term structure, VVIX adds context on volatility regime changes, though it offers no guaranteed early warning. This second-derivative thinking separates disciplined volatility traders from those reacting only to lagging price action.