The VIX rule of 16 is a helpful guideline for all the investors and traders out there. It’s simple, to the point, and a nice rule of thumb to follow in volatile times.

The VIX Rule of 16 helps estimate daily price movements of the S&P 500 (SPX) based on the CBOE Volatility Index (VIX). It implies that when the VIX is at 16, the SPX is expected to move about 1% per day on average. Then, keep going from there.

This rule works by scaling volatility estimates using the square root of the approximate 252 trading days in a year, which is roughly 16. For example, if the VIX is at 24, the SPX might see daily moves of around 1.5%, while a VIX of 32 suggests 2% daily moves.

Now you have it.

When you see the VIX, divide it by 16, and that’s what the options market is pricing in for the estimated S&P 500 daily move.

Helpful? Very!