Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

Question: 1 / 400

What does the VIX formula help estimate regarding market prices?

Future earnings of companies

Expected 30-day volatility

The VIX formula is specifically designed to estimate the expected 30-day volatility of the stock market, reflecting the market's expectations for future price fluctuations. By utilizing options prices on the S&P 500 index, the VIX captures the consensus forecast of volatility, which is crucial for traders and investors as it serves as a gauge of market risk and uncertainty. A rising VIX indicates that traders expect greater volatility in the near term, which often correlates with increased market turbulence, while a lower VIX suggests a more stable market environment. This focus on short-term volatility aligns directly with the purpose of the VIX, making it an essential tool for understanding market dynamics related to risk perception.

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Market liquidity

Investor sentiment

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