The India VIX value is derived by using the Black & Scholes (B&S) Model. The B&S Model uses five important variables like strike price, the market price of the stock, time to expiry, the risk-free rate, and volatility. India VIX was introduced by NSE in the year 2008, but the concept of VIX is quite old and is a trademark of CBOE (Chicago Board Options Exchange).
One simple way of understanding India VIX is that it is the expected annual change in the NIFTY50 index over a period of 30 days. For example, if the India VIX is currently at 11, this simply means that the traders expect 11% volatility for the next 30 days.
Further, for example, if the current index is trading at 17,862 and India VIX trading at 18.05 Then, expected volatility over next year over 30 days will be:
Index spot: 17,782
India Vix: 18.05
The expected downside for the year = 17,782 – 18.05% of 17,782 = 14,572
The expected upside for the year = 17,782 + 18.05% of 17,782 = 20,991
Here, the expected range for the year is between (14,572 and 14,572) for that index.
A lower VIX level usually implies that the market is confident about the movement and is expecting lower volatility and a stable range.
A higher VIX level usually signals high volatility and lower trader confidence about the current range of the market. A major directional move can be expected in the market and a quick broadening of range can be expected.
dasarajurajasekhar
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Sir ji, ur analysis is great, previously I used to c ur chart for intraday trading, but my view is wrong, ur chart is for weekly trade and it will give enough profits, great great great. T u
sanjaysarma25
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Thanks brother
subhagghosh
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Intraday movement are more of noise, try to catch the bigger picture and one good trade is enough for the whole week.
dasarajurajasekhar
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but what's VIX trading means sir ji, because still i am in learning mode
dasarajurajasekhar
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but for INTRADAY TRADER its for fear
dasarajurajasekhar
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exactly sir ji, even though i am not trading just i am observing ur views, thats why i am confidently saying that ur views are for the week but not for intraday
@krishna_rajput_options, simply put, VIX is rising according to this chart. And when VIX rises, it means that the traders are afraid of market getting weaker and they sell in a panic. This leads to more selling and more increase in VIX. The cycle continues unless there's strong buying again introduced in the market.
One simple way of understanding India VIX is that it is the expected annual change in the NIFTY50 index over a period of 30 days. For example, if the India VIX is currently at 11, this simply means that the traders expect 11% volatility for the next 30 days.
Further, for example, if the current index is trading at 17,862 and India VIX trading at 18.05 Then, expected volatility over next year over 30 days will be:
Index spot: 17,782
India Vix: 18.05
The expected downside for the year = 17,782 – 18.05% of 17,782 = 14,572
The expected upside for the year = 17,782 + 18.05% of 17,782 = 20,991
Here, the expected range for the year is between (14,572 and 14,572) for that index.
A lower VIX level usually implies that the market is confident about the movement and is expecting lower volatility and a stable range.
A higher VIX level usually signals high volatility and lower trader confidence about the current range of the market. A major directional move can be expected in the market and a quick broadening of range can be expected.