InvestorQ : I understand that even the volatility index is an important tool to use in technical analysis. How can that be used?
rhea Babu made post

I understand that even the volatility index is an important tool to use in technical analysis. How can that be used?

Answer
user profile image
1 year ago


The CBOE Market Volatility Index (VIX) or simply the NSE VIX in India is a Volatility Index which measures and plots the volatility that is embedded in the option prices. The VIX is called the Fear Index because it shows the degree of fear in the market. Normally, when the market fear is high, options tend to price in higher volatility and the reverse operates in the other case.

The Chicago Board of Options Exchange Market Volatility Index (VIX) is a measure of implied volatility, based on the prices of a basket of S&P 500 Index options with 30 days to expiration. It is an important lead indicator for the index as a whole. In India and also in the world, the VIX chart has typically had a negative correlation with the index chart and hence it becomes a useful tool for taking a view on the index based on the turnaround signals coming from the VIX chart.