INDIA VIX BASED NIFTY RANGE CALCULATION
Discover the Nifty Range Calculator using India Vix, a valuable tool for traders and investors. By leveraging India Vix, you can estimate the expected volatility and price movement of the Nifty index.
Gain insights into market dynamics and make informed decisions with ease. Join us now to calculate the Nifty range and navigate the ever-changing financial landscape effectively.
What is the formula for Nifty range?
Formula – Vix as percentage/Square Root of Time
To predict the expected volatility of the Nifty index in the next 30 days, the India VIX comes in handy. It offers insights into the potential price fluctuations of Nifty. Here’s how you can calculate the anticipated movement:
First, take the current VIX value, let’s say it’s 20. Then, determine the time period by dividing 365 (number of days in a year) by 30, resulting in 12.
To calculate the expected volatility, divide the VIX value by the square root of the time period. In this case, it would be 20 divided by the square root of 12, which amounts to 5.77%.
Therefore, you can expect Nifty to exhibit a movement of approximately 5.77% in either direction (upside or downside) over the next 30 days.
How do you calculate market range?
Nifty Range = (Nifty Price – Duration Vix%) to (Nifty Price + Duration Vix%)
To calculate the Nifty range, follow these steps:
- Collect the historical data of Nifty index values over a specific time period.
- Identify the highest value (Max) and lowest value (Min) from the collected data.
- Use the following formula to calculate the Nifty range:Nifty Range = (Nifty Price – Duration Vix%) to (Nifty Price + Duration Vix%)
Subtracting the minimum value from the maximum value gives you the range of the Nifty index.
The range provides insights into the extent of price movement within the given time period, indicating the overall volatility or price spread of the Nifty index during that period.
What is India Vix?
India Vix, also known as the “Fear Index,” is a key measure of market expectations for near-term volatility in India.
It represents the expected annual volatility in the Nifty50 index over the next 30 days. India Vix reflects the sentiment of the entire market, providing insights into expected market volatility.
How is India Vix calculated?
India Vix is calculated based on option prices on the National Stock Exchange (NSE). It measures the expected volatility over the next 30 days by taking the weighted average of the implied volatility from Nifty 50 index options.
Option prices reflect market expectations of volatility throughout the remaining life of the option contract.
What does Higher/Lower Vix indicate?
A higher value of Vix indicates stress, fear, and anxiety in the market, suggesting higher expected volatility.
Conversely, a lower Vix value indicates stability in the market with lower expected volatility. Vix serves as a gauge of market sentiment and can help investors assess potential market movements.
What is the correlation between India Vix and Nifty?
India Vix is negatively correlated to the Nifty index. When the market index (Nifty) drops, indicating a decline in stock prices, the Vix value tends to increase, signifying higher expected volatility.
Conversely, when the market index rises, the Vix value tends to decrease, indicating lower expected volatility.
Common Myth about India Vix:
It is a common misconception that when the market falls, India Vix will rise, and when Vix rises, the market will fall.
However, this is not always true. Vix can go up in a rising market and go down in a falling market as well. The relationship between Vix and market movements is more nuanced and depends on various factors.
How to use India Vix:
Hedging against volatility: The Vix index can be used as a tool for hedging against market volatility. Investors can utilize options or other volatility-based instruments to hedge their portfolios during periods of heightened volatility.
By monitoring the Vix value, investors can identify market movements and hedge their positions to protect against potential market downturns.