Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

The CBOE Volatility Index (VIX) specifically measures the 30-day implied volatility of options on the S&P 500 Index. It is often referred to as the "fear index" because it reflects market expectations of future volatility based on the prices of options. Implied volatility is derived from the market prices of options and provides insights into how much the market expects the underlying asset to fluctuate over the next 30 days. Therefore, the focus on a specific time frame, in this case, 30 days, is what makes this measurement particularly relevant for traders and investors looking to gauge market sentiment and potential price movements.

In contrast, the other options do not accurately describe what the VIX measures. Daily market volatility refers to short-term fluctuations that the VIX does not specifically quantify. Yearly trend volatility suggests a long-term perspective that is not the primary function of the VIX, which is focused on a one-month horizon. Historical price volatility looks at past price movements rather than current market expectations, which is outside the scope of the VIX's intended purpose.