- Equity market volatility has been unusually low over the past few years
- And investors have been lulled into a sense of complacency that what goes up will continue to go up.
- Recent gyrations in the market have brought volatility to higher & at more traditional levels.
- We believe the days of easy money are over and that 2019 will be a period of major volatility and high risk for investors.
- VIX Increases as market is heading towards a Big Event or when people are Expecting High Extreme movements normally Increase in VIX is associated with downward risk potential.
- VIX Play very Important role for participants Trading in Derivative Instruments.
- VIX can make and Break ones account trading in Futures and Options.
- VIX Is very useful in determining potential Risk of a portfolio going ahead.
- If VIX is High and Event is Unfavourable then there would be an extreme Level movement in Index and Stock Prices.
- VIX Increases due to Increase In Implied Volatility Of Options.Currently India VXI is trading around 26.36.
- Increase in Implied Volatility means Higher premium demanded by Option Seller.
- Option seller demands high premium because of high Risk associated with extreme movements means Limited profit and unlimited loss potential in theory.
- This extreme Movement become difficult to handle so Option seller demands Higher Premium.
MARKETS TO REMAIN VOLATILE TILL ELECTION RESULTS ARE OUT. ONE SHOULD WAIT FOR OPPORTUNITY TO ADD GOOD QUALITY STOCKS AT LOWER LEVELS ONLY.
NIFTY BELOW 11500 CAN TEST 11380/11300/11111/10900/10750/10600 Gradully KEEP EYES ON ALL LEVELS.
Disc – All views expressed are personal and for Educational and study purpose only. Consult your financial advisor before investing based on above article.