When the VIX Prices More Fear Than the Market Delivers.
The Volatility Risk Premium tool measures the gap between fear and reality. VRP is the VIX minus the S&P 500's realized volatility over the past six months, how much more the market is charging for protection than it has actually needed. The tool shows where that premium sits in its own history and, on past days when it was this stretched at a similar VIX level, how often the VIX went on to spike.
Most traders read the VIX as a fear gauge and leave it there. But a VIX of 18 means something very different when the market has been dead calm than when it has been whippy, because the premium over realized vol is what compensates sellers and warns buyers. The decision-relevant question is not the level of the VIX, it is how far it has run ahead of delivered volatility, and what that stretch has meant for a real spike.
A rich premium is not a green light and a thin one is not a warning: what follows depends on how high the VRP sits by percentile, where the VIX itself is, and the window you care about. A wide premium with the VIX already elevated is a different setup from the same premium with the VIX asleep. The tool conditions on both the premium and the VIX level at once and reports the forward spike odds from the matching history, so the read holds up in context rather than in isolation.
A live VRP percentile, the forward VIX-spike odds from matching history, a VIX move-probability chart, a spike-risk banner, and a full log of past days with a VRP and VIX reading like today's.
Where the premium of VIX over realized vol sits in its full history, from thin to stretched.
On past days this stretched at a similar VIX level, how often the VIX went on to spike.
The chance the VIX rose at least 5, 10, 15, or 20 points within 5, 10, or 20 trading days.
Matches today on both the VRP percentile and the VIX level, not on one in isolation.
Turns red when history put the odds of a +20 VIX move within 20 days above 5%.
A full log of every past day with a VRP and VIX reading like today's.
See how stretched the premium of VIX over realized vol is, scored against its full history.
See how often the VIX actually spiked after the premium ran this high at this VIX level.
Read the chance the VIX reaches plus 5, 10, 15, or 20 points within the window you care about.
Open the log of past similar VRP and VIX setups. Check the sample size and whether the matches cluster in one regime before trusting the odds.
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