INDIAVIX trade ideas
educational1 : India vix-( lowest since 2012)1. Globally known as a 'fear index', Vix is actually one of the best contrarian indicators in the world. Chicago Board Options Exchange (CBOE) which owns the Vix trademark say that since volatility (high) often signifies financial turmoil, Vix is often referred to as the investor fear gauge. The index is colloquially referred to as the fear index.
2. In India, value of Vix has been computed by the NSE since November 2007 based on the out-of-the-money (OTM) option prices of the Nifty. It has touched a high of 85.13 and a low of 13.04. As it is mentioned in percentages, value of Vix can never be below zero or more than 100.
3. Historical data indicates that India Vix has a strong negative correlation of negative 0.8 to the Nifty. This means that every time Vix falls, Nifty rises and every time it rises, it means that a fall is imminent. India Vix touched a value of 85 percent, a few days before Nifty touched a bottom post the Lehman Crisis.
4. India Vix has a mean of 26.65 and a median of 23.83, these figures are important for option writers and traders since Vix has a tendency to revert to the mean.
5. The India Vix futures contract will have a weekly settlement and have three running contracts along with three spreads between the contracts (spreads are the difference in prices between two contracts). One need not have the vision of a planning commission or a economist to trade the contracts. A smaller vision of one week or a maximum of one month is good enough to determine the volatility. Shorter term Vix indices are more responsive to short term volatility which will be induced due to corporate earnings, government policy announcements or RBI's policy changes.
6. Volatility is easier to predict than price. One will not know the price of Infosys after it announces its results, but it is easier to know that volatility will increase immediately after profit and guidance numbers are announced by the company's management.
7. Vix futures are also considered to be a better hedge than a index future.This is because Vix indices are more volatile and offered three to four times more returns than an asset based index. The recent 5.4 per cent drop in the Nifty between January 23rd 2014 and February 13, 2014 resulted in a 14.8 per cent change in the volatility index.
8. The high gains are precisely the reason why speculators are attracted towards it. NSE however, has kept the lot size for each contract at around Rs 10 lakh which will attract a margin of Rs 2 lakh, thus making the product more expensive for the retail investor.
9. Currently India Vix is in the lowest quartile, which partly explains the Nifty trading within three per cent of its all time high point.
10. In order to promote the futures contract, NSE is offering rebate ranging between 10 and 40 per cent in transaction charges, depending on the overall volume.
*source- buisness standard
The VIX is giving confidence that we are in consolidationThe Fear Index drift Further down,the low was 9.92 last week.
A lower volatility means that a security’s value does
not fluctuate dramatically, but changes in value
at a steady pace over a period of time.
VIX' level of below 15 is seen as stability to the
market, while a figure above 15 indicates high volatility.
So be bullish and get use of the consolidation to invest more in the market.
"Risk comes from not knowing what you're doing"-Warren BuffettHave projected my views on the chart itself...
It is the downtrend in VIX which is helping push / maintain Nifty in the upward direction...
Keep a close eye on Volatility index as it may be an early indicator to signal a reversal in market.
And if VIX starts moving up towards 24 some time later this year (it has tested 24 levels each year in the last 5 years), and barring once during 2014 election time, on 4 other occasions whenever that has happened Nifty has seen a fall of 10-15 % magnitude. You definitely would not want to be a buyer in that market...
Take care and safe trading...!!!
The Fear Index made an extreme low 10.24 last week.A lower volatility means that a security’s value does
not fluctuate dramatically, but changes in value
at a steady pace over a period of time.
VIX' level of below 15 is seen as stability to the
market, while a figure above 15 indicates high volatility.
The NSE site says 20 is the safe range, but nifty' was rarely stayed in that level.
Vix is at 11.49 low nowThe Fear Index made an extreme low 10.39 on17thMarch.
A lower volatility means that a security’s value does
not fluctuate dramatically, but changes in value
at a steady pace over a period of time.
Thais what is happening now.
VIX level of below 15 is seen as stability to the
market, while a figure above 15 indicates high volatility.
VIX is at an extreme low 11.85,Ssupports the bullish viewThe Fear Index made an extreme low 10.39 Last week.
A lower volatility means that a security’s value does
not fluctuate dramatically, but changes in value
at a steady pace over a period of time.
That what happening now.
VIX level of below 15 is seen as stability to the
market, while a figure above 15 indicates high volatility.
Now there is No FEAR.. :D
INDIAVIX: Potential Movement INDIA VIX: It is measure the future volatility and used for hedging. Low volatility means Stock or Index will up but slowly & High volatility means Stock or Index will sharp down.
Due slowly increase VIX but Nifty, Sensex, Bank nifty near to Double Top, so there is the possibility market will react (Mar 2017-Jun 2017), Mostly Bank nifty highly overbought (Bank restructure due to Bad loans, May some Political issues).
The Fear Index made an extreme low 11 Last week. increasing now.NSE Volatility the VIX index low has reached the level of 12 and below. Given that market experts no fears of any correction in the coming days. So, traders doesn’t care trading long in the stock market.
Volatility Index is a key measure of market expectations of near term volatility. As we understand, volatility implies the ability to change. Thus when the markets are highly volatile, market tends to move steeply up or down and during this time volatility index tends to rise. Volatility index declines when the markets become less volatile. VIX is sometimes also referred to as the Fear Index because as the volatility rises, one should become fearful or I would say careful as the markets can move steeply into any direction.
VIX level of below 15 is seen as stability to the market, while a figure above 15 indicates high volatility.
Volatility refers to the amount of uncertainty or risk about the size of changes in a security or index value. A higher volatility means that a security’s value can potentially vary over a larger range of values. This means that the price of the security can change dramatically.
VIX indicates the market’s perception of the expected near term volatility. All securities, indices are subjected to volatility and thus the studying them can be helpful because, options prices are chiefly governed by the volatility in the market.
Calculations:
NIFTY options order book of current month and next month, calls and puts increase in average premiums and discounts are determined to calculate the VIX Index.. India VIX is computed using the best bid and ask quotes of the out-of-the-money near and mid-month NIFTY option contracts, which are traded on the F&O segment of NSE. There are several factors which are used to calculate the index. Some important ones are these Greeks: Time to Expiry, Interest Rates, The Forward Index Level, Bid-Ask Quotes, and Weightage.
Then the variance for the near and mid-month expiry computed separately are interpolated to get a single variance value with a constant maturity of 30 days to expiration. The square root of the computed variance value is multiplied by 100 to arrive at the India VIX value. In a nutshell or in short, from a usage point of view, higher the VIX index value, higher the volatility.
INDIAVIX made a low 11.78 & at support nowThe Fear Index made an extream low today,avoiding the spikes
Budget opportunities NiftyThis time around the budget is more special than usual years, it is the budget after demonetisation and is coming one month earlier than usual. As seen in the chart and the green boxes the volatility usually peaks during the budget, this time we should expect no different. Another point is the strong negative correlation between the India Vix and Nifty. So good opportunity to write options around this time for Nifty Feb. Given the expectations ahead of this budget would expect a good rise in the market till end of the month.
NIfty, Some more work to do ....Let Nifty do some Basing Work, before jumping to the BUY side.
In any case that is highly unlikely to happen before Thursdays Options Expiry.
So Have Patience.
