What is VIX India?
VIX is volatility index showing market momentum and market’s
expectation of volatility over the near term. Volatility is often described as
the “rate and magnitude of changes in prices" and in finance often
referred to as risk. Volatility Index is a measure, of the amount by which an
underlying Index is expected to fluctuate.
What is importance of VIX?
Generally VIX provide view for overall sentiment of market through
which one can get idea of market and fear involved in the market.
Basic of VIX.....
Higher the VIX higher will be fear or uncertainty
Lower the VIX index lower will be fear
So, one can get an idea of Money Flowness where VIX index is
stable or higher or lower.
Can VIX is useful to make position in options?
It is very logical question, VIX is useful to me to create my
option position. The answer is YES, by studying VIX we can ascertain the risk
involved in stock market. In last 3 days as on 25 Feb the VIX was at high
because of air strike done by Indian air force.
In a week period I.e. 1st March today VIX fall almost 20% from
pick. So, market is showing some strength and almost every stock option fall
drastically due to fall in VIX. Take any name reliance volatility was 29
and during day it reach to 26, so VIX is common parameter to study overall
market fear.
when VIX fall what will happen?
Basically, VIX is directly relating to premium of option. When VIX
is at high time value of option will be high, when VIX fall time value will
goes down fast. One can see depreciate of option price without fluctuations in
underlying.
Is VIX tradable, can buy or short?
It's not stock, is index. So, one can't do trade directly. But in
foreign VIX ETFs available where one can do trade.
Is
Individual Stocks Have Its Own VIX ?
Yes, Each and every stock has its base VIX depends on Movement
expected in one year time Frame. Expected movement expected in one year is VIX
number. Stock has Implied Volatility while VIX is Index of Volatility. Example:
SBIN is having 32 Implied Volatility where as IBULL HOUSING has 55 Implied
Volatility. In yes Bank Earlier there was 30 Implied Volatility but due huge
fall its Volatility increase to 65.
When VIX goes up ?
When market turn negative with big uncertainty the price of put
use to rise soon 200-300% in no time.
During election period VIX will be at pick, irrespective election
result once outcome comes VIX tend to go down soon.
VIX always at pick when result of any underlying stock about to
come, once result announces VIX use to go down.
In short when VIX at pick strangle of option will be at pick.
Lower the VIX lower the straddle of index.
How VIX is calculated?
The VIX is calculated using a formula to derive expected
volatility by averaging the weighted prices of out of the money puts and calls.
For complex calculation follow below link....
Happy reading
Derivativelearn
0 Comments