How Varying VIX Ranges Can Impact S Returns

Rocky White Wed, October 28, 2026 at 8:00 AM EDT 4 min read **

• ^VIX
• ^GSPC

The Cboe Volatility Index (VIX) spiked a couple weeks ago on investor fears about AI spending and financing. Oil also moved higher due to Middle East concerns, which didn't help sentiment. The VIX moved from about 15 to 20 over a couple of days and now sits around 17.5.

It wasn't a severe spike, but because we're option traders and the VIX measures the cost of options, it got me wondering what the higher option prices meant for trading profits. To answer this, I'll look at option returns alongside VIX levels over the last 10 years.

iotw1oct27

SPY Options by VIX Level

For this analysis, I went back 10 years and grouped trading dates into six buckets based on the level of the VIX, so each bucket had the same number of dates. Then I found the returns for the S&P 500 ETF Trust (SPY) **and its options over the next 30 days. For the option returns, I modeled hypothetical at-the-money options with 30 days until expiration, using implied volatilities (IV) of actual SPY options for each day. I assumed options were held until expiration and closed at intrinsic value.

The table below shows the average return of the SPY and its call, put, and straddle return over the next 30 days when the VIX is in the corresponding range. The third and fourth row are bold because we've recently seen the VIX spike to about 20, but now it sits near 17.8, on the cusp of those two rows.

I find this table very interesting. My first observation is I wish I knew blindly buying SPY calls over the past 10 years would have been so profitable, averaging a return of about 16% per trade.

Second, cheap options have, in fact, led to bullish option returns. When the VIX was below 16 (the first two rows of the table), both calls and puts averaged positive returns. The returns were especially bullish when the VIX was below 14 (the first row of the table) where both calls and puts (and therefore, straddles) averaged a return of about 24%. The VIX was near 14 just last month.

A final observation, using the VIX as a fear gauge and contrarian indicator to become bullish on the SPY when the VIX was above 25 would have been a good strategy. The SPY averaged a return of 3.45% over the next month when the VIX was at those levels with SPY calls averaging a return of 44%. Using the VIX as an indicator for SPY options seems simple after the fact.

Iotw2oct27 This next table shows more stats for the call returns, by VIX level. The calls were most profitable at both extremes. At their cheapest (VIX below 14), the SPY calls averaged a return of about 24%. When the VIX was highest (above 25), calls averaged a return of 44%.

Story Continues Interestingly, we sit between the third row (VIX levels 16 – 17.8) where the call return was just under 2% per trade, the least profitable level in the table, and the fourth row (VIX levels 17.8 – 20.5), where calls averaged around 14%, third best bucket in the table. That's a big difference, especially considering the SPY averaged a return of 0.82% in both buckets.

How does that happen? That tells us the main driver of option returns isn't the average of the underlying, but the distribution of the underlying returns. Note the average positive returns of the two ranges (95% versus 124%). The SPY calls tended to make more outsized moves when the VIX was in that fourth row's range compared to the range of the third row.

iotw3oct27 This last table considers the SPY call returns when the VIX was between 16 and 20.5 (it combines the results from the third and fourth rows of the table above). With that being the middle of the overall VIX range, I wanted to see if there was a difference whether the reading was high compared to the last year, or low. Given the recent spike, the VIX percent rank moved above 75% for a few days. The percent rank has fallen below that over the past couple days, which looks like good news.

The data shows when the VIX has been at a low level and then moves up into the 16–20.5 range (the percent rank is high), the SPY call options have been overpriced, averaging a return of about -7%. When the VIX is trading in that level and it's been the "normal" range over the past year or "low," then the calls averaged a return between 10.8% and 12.5%. SPY calls have dropped enough over the past couple of days to be a buy based on this indicator.

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