Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Inida VIX – Volatility Index

1 min read

              
If you are a nifty trader then you should be familiar with Nifty Volatility Index VIX 
 
India VIX    
                                                    
Volatility Index is a measure of 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, in the near term, (calculated as annualised volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options.

India VIX is a volatility index based on the Nifty 50 Index Option prices. From the best bid-ask prices of Nifty 50 Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 calendar days.

 
Computation methodology of India VIX
 

Uses of Volatility Index

Volatility Index offers great advantages in terms of trading, hedging and introducing

derivative products on this index. Investors can use volatility index for various purposes as

mentioned below:

• Investors’ portfolios are exposed to the market volatility. Investors could hedge their

portfolios against volatility with an off-setting position in India VIX futures or options

contracts.

• Volatility index depicts the collective consensus of the market on the expected

volatility and being contrarian in nature helps in predicting the direction. Investors

therefore could appropriately use this information for taking trading positions.

• Investors could also use the implied volatility information given by the index, in

identifying mis-priced options.

• Short sale positions could expose investors to directional risk. Derivatives on

volatility index could help investors in safeguarding their positions and thus avoid

systemic risk for the market.

• Based on the experience gained with the benchmark broad based index, sector

specific volatility indices could be constructed to enable hedging by investors in those

specific sectors.

 

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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One Reply to “Inida VIX – Volatility Index”

  1. Hi Rajandran,

    I am the regular visitor of your website and i would like to thanks you for posting good and valued information. Your website is very helpful for me and have learned lot of things. Right now i am learning Amibroker code and working on a small scanning AFL code. I expect your help to go further.

    I need a AFL code to scan a stock with sharply increasing ROC(12) over the past 5 days (Increasing ROC).

    Expecting your reply.

    Thanks in advance.
    Regards,
    Vinod Pillai

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