India VIX is a short form for India Volatile Index which tells the volatility and fluctuations in the market that are important to know for all investors. It is also called fear gauge index. The India VIX is commonly used to measure investor confidence in the market.
India VIX is a reliable and sound indicator of the market volatility and fluctuations. This informs the intraday traders about the rise and fall in the market volatility. This helps intraday traders and investors to determine the market risks for equities.
Typically, VIX oscillates between 15 and 35. Any value around or below 15 represents low volatility. Any value higher than 35, which indicate high fluctuations in the market.
Contrarian investors who look for market opportunities by going against conventional thinking, consider a low reading on the India VIX to be a bearish signal. As per him market complacency that may spell bad news ahead. While a high VIX reading is believed by some to be a bullish signal.
When the India VIX is low, volatility is low. When the India VIX is high, volatility is high. Buying when the VIX is high and selling when it is low is a strategy. This is true if all other factors and indicators remaining same.
VIX Calculation involves both the current month and next month Out of the Money (OTM) options. In the Money (ITM) and At the Money (ATM) options are excluded from VIX calculation. These bid and ask prices of OTM options are considered for calls and puts. The output you get is the VIX.
If the India VIX index moves up, it is likely that the Nifty is falling in price. If the volatility index declines, then the Nifty is likely to be experiencing stability. The India VIX index is thought to predict tops and bottoms in the Nifty. There is even a mantra that states: 'when the India VIX is high, it's time to buy.
Historical data shows that after similar drawdowns, the India VIX level was significantly higher than the current level, indicating lower volatility expectations. The India VIX can be used as an indicator to assess the risk-reward profile of the Nifty, but it cannot predict the future.
Even if the stock price remains at the same place, the value of the option can go up if volatility goes up. It is always advisable to be buying options when the volatility is likely to go up and sell options when the volatility is likely to go down.
According to the rule of 16, if the India VIX index is trading at 16, then the Nifty is estimated to see average daily moves up or down of 1% (because 16/16 = 1). If the India VIX is at 24, the daily moves might be around 1.5%, and at 32, the rule of 16 says the Nifty might see 2% daily moves.
The India VIX displays a negative correlation with the NIFTY index as well. When the India VIX decreases, the NIFTY rises, and when the India VIX goes up, typically, the NIFTY drops.
By identifying the highest and lowest values, and considering the current Nifty price and India Vix for the next 30 days, investors can use the formula: Nifty Range = Nifty Price - (Duration * Vix%) to Nifty Price + (Duration * Vix%) to obtain the range.
In general, a VIX reading below 20 suggests a perceived low-risk environment, while a reading above 20 is indicative of a period of higher volatility.
|India vix live is LTP: 12.1
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