Though most of the senior members must be knowing about volatility ( Fear Index ) OR VIX and India VIX (IVix), but for those who are not aware, here is the short explanation :
1) The co-relation between IVix and equity market perticularly Nifty / BN is negative or inverse. Means low volatility (IVix) tells that traders and investors are comfortable to invest due to less fear factor in the equity markets. VIX is generally at high level, when market is trying to find a bottom and subseqiently market starts cooling off taking VIX downward due to expected decrease in FEAR FACTOR in near future.
2) VIX values of greater than 30 are considered to signal heightened volatility from increased uncertainty, risk and investor fear.
3) The VIX decreases when there's less demand for put options as the market rises. That's why it tends to move inversely to equities
VIX is also a useful indicator for the trader in options. Normally, the decision to buy or sell an option is based on volatility. When the volatility is LESS and likely to RISE in near term, options are likely to become more valuable and buyers tend to gain more. When the VIX is coming down there will be more wasting of the time value and option sellers are likely to benefit more.
4) In rare cases, like during 2014 general elections, both VIX and NIFTY started falling together sharply bringing down Call option prices and after the results Nifty shoot-up sharply taking option prices to sky-high making many CE buyers rich in a short time.
Anyways, as you know, it is a complex subject and fit for researcher gene !
For more details , pl check this link:
https://www.motilaloswal.com/blog-d...olatility-Index-(VIX)-indicates-to-you../1929
1) The co-relation between IVix and equity market perticularly Nifty / BN is negative or inverse. Means low volatility (IVix) tells that traders and investors are comfortable to invest due to less fear factor in the equity markets. VIX is generally at high level, when market is trying to find a bottom and subseqiently market starts cooling off taking VIX downward due to expected decrease in FEAR FACTOR in near future.
2) VIX values of greater than 30 are considered to signal heightened volatility from increased uncertainty, risk and investor fear.
3) The VIX decreases when there's less demand for put options as the market rises. That's why it tends to move inversely to equities
VIX is also a useful indicator for the trader in options. Normally, the decision to buy or sell an option is based on volatility. When the volatility is LESS and likely to RISE in near term, options are likely to become more valuable and buyers tend to gain more. When the VIX is coming down there will be more wasting of the time value and option sellers are likely to benefit more.
4) In rare cases, like during 2014 general elections, both VIX and NIFTY started falling together sharply bringing down Call option prices and after the results Nifty shoot-up sharply taking option prices to sky-high making many CE buyers rich in a short time.
Anyways, as you know, it is a complex subject and fit for researcher gene !
For more details , pl check this link:
https://www.motilaloswal.com/blog-d...olatility-Index-(VIX)-indicates-to-you../1929
