India VIX Volatility Index: India VIX Volatility Index, which is recognized as a barometer of fear in the stock market, has risen 23 per cent to 23 points. This indicates increasing panic among the market participants. India Wicks today’s reading is the highest in the last one month. Despite this increase, the VIX reading is not even around 87 as of March, 2020, when the Covid pandemic started.
The Vicks index is usually between 15-17
The highest India Vicks was during the 2008 Global Financial Crisis, when it reached the level of 92.53 on November 14, 2008. In normal times, the wicks move between 15-17 and when the market is comfortable, it drops to a low of 12-13. At the level of 12-13, it was during July-August last year, when the market was seeing a steady rise.
However, India Vicks is known for its rapid turnaround, much like the US Volatility Index CBOE VIX, in the run-up to a major event and in tough times. The Union Budget and the election results are some of the major events that cause fluctuations in the Wicks Index.
Vicks had risen to 26 ahead of the 2021 budget
For example, before the general budget of 2021, VIX had risen to 26, and the second wave of covid came in April-May, at which time the index reached 29.
Traders keep a close eye on this index to gauge the fear in the system and this is very important for traders who enter options contracts on the index and select stocks. During high volatility, options writers charge a hefty premium, as the market is expected to remain volatile. Remember that if the buyer of a contract exercises it, the options writers are bound to perform the contract.
Risk increases in times of volatility
Of course, in times of volatility, the risk is also very high. Conversely, when the market is not volatile, they opt for buy as they get a cheaper buy option. In a stable market, options writers are usually at an advantage most of the time, as prices tend to stay in a range.
Options trading (buying or selling) is best suited for professional traders with advanced analytical tools and high risk appetite.
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