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How can I use India VIX in option trading?
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.
What is the relation between India VIX and Nifty?
There has been a consistently negative correlation between the VIX and the Nifty levels. The historical correlation ranges between (-0.80 and -0.85). This is indicative of a strong negative correlation. This enables you to trade a popular range for the VIX.
What happens when India VIX falls?
Further, past trends suggest that there is a negative correlation between Nifty and India VIX. Every time India VIX falls, the Nifty rises. And when India VIX rises, Nifty tends to fall.
What is a good VIX number?
In absolute terms, VIX values greater than 30 are generally linked to large volatility resulting from increased uncertainty, risk, and investors’ fear. VIX values below 20 generally correspond to stable, stress-free periods in the markets.
How do you calculate VIX?
VIX Calculation Step by Step Calculate 30-day variance by interpolating the two variances, depending on the time to expiration of each. Take the square root to get volatility as standard deviation. Multiply the volatility (standard deviation) by 100. The result is the VIX index value.
How does India VIX calculate daily volatility?
If you want to calculate expected volatility for the near term using the VIX, say a month then formula to use is (VIX/Sqrt (T)) \%. The formula for that is VIX divided by the square root of T. If you want the volatility for “x” days then T would be “365/x”.
What happens when VIX falls?
What does it mean when the VIX is low? When the VIX is low, it means there is less market fear, more stability and long-term growth. The VIX typically has a negative correlation with the S&P 500, so when the VIX is low, the S&P 500 is usually experiencing a rise in price.
How do you analyze India VIX?
The India VIX is calculated based on the order book of Nifty options. The best bid-ask quotes of the near-month Nifty options and next-month Nifty options are considered. The India VIX reflects the expected volatility in the next 30 days.