Volatility is one thing which nobody likes, and that’s the biggest reason most people don’t want to invest money in the market place, however, it’s very much correlated to the human heart in terms of ECG GRAPH.
But still, everyone wants to know always “Baazar kya bolta hai?” and the best answer to this question is VIX!!!
This has been originally generated by Created by the Chicago Board Options Exchange. Volatility Index, or VIX, is a real-time market index that represents the market's expectation of 30-day forward-looking. This truly represents the direction of the market for that much time because it calculates the average bulls and bears positions in real-time and represents the true picture in the next 30 days.
In other words, this is an indication that what sort of trade you need to plan for your stocks or the future or options trading planning.
VIX is derived from the price inputs of the option data which is happening in real-time on the indexes. How many calls are open? And how much puts? Are standing in open interest that it calculates in real-time and gives the direction.
It provides a measure of market risk and investors' sentiments. It is also known by other names like "Fear Gauge" or "Fear Index." Investors, research analysts, and portfolio managers look to VIX values as a way to measure market risk fear, and stress before they take investment decisions.
During periods of market volatility, the market moves steeply up or down and the volatility index tends to rise. As volatility subsides, the volatility index declines. Volatility Index is different from a price index such as NIFTY.
The price index is computed using the price movement of the underlying stocks. Volatility Index is computed using the order book of the underlying index options and is denoted as an annualized percentage.
Mostly VIX and Indexes are inversely proportional to each other. This means if VIX is going up then the market most of the time falls and if it will come down then the market is going up. In that context this is one of the great tools to know the market momentum, however, this is not guaranteed and it may sideways as well for so many time.
There are so many tools in the NSE site to learn and understand how it works and you can get it to understand from the Imperial Finsol team as well for the same.
It gives a good range too to buy and sell the securities as well. Mostly it is in the range of 14 to 25 and this is most of the time in the range only.
Trades can trade future trading in VIX. It’s just like gold, as gold is having a range and people know that this works in the same range for a long time and hence it's easy to trade in gold fearlessly so the trade-in VIX.
Points to be noted for Investors in Volatile Market:
- VIX is a real-time market index representing the market's expectations for volatility over the coming 30 days.
- Investors use the VIX to measure the level of risk, fear, or stress in the market when making investment decisions.
- Traders can also the VIX using a variety of options and exchange-traded products, or use VIX values to price derivatives.
Source: Imperial Finsol Pvt. Ltd