Wall Street Is Getting a New Fear Gauge. Meet the One-Day VIX

About a month ago, as Wall Street stared down the barrel of an incipient banking crisis, the investment world’s most-watched gauge of market volatility did a funny thing: It didn’t do much.

Sure, the Cboe Volatility Index — a measure of expected swings in the S&P 500 Index also known as the VIX — climbed. But even at its intraday peak, it didn’t come close to levels seen multiple times just a year ago.

Many theories abound for why this once-reliable indicator of sentiment — famously known as Wall Street’s fear gauge — seems to be losing its edge. But one in particular keeps coming up: That traders hedging against — or betting on — turmoil are piling into options with zero-days-to-expiration, or 0DTE.

Since the VIX is calculated using derivatives that expire 23 to 37 days into the future, the thinking is that it has been struggling to capture this near-term sentiment, which largely emerged last year when the introduction of new expiration days fomented the boom.

Put simply: In the age of 0DTE, Wall Street may need a new fear gauge.

Enter the one-day VIX.