InvestorQ : Is the NSE VIX same as the American VIX and what does it quickly indicate to an investor?
Mary Joseph made post

Is the NSE VIX same as the American VIX and what does it quickly indicate to an investor?

Answer
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sara Kunju answered.
1 year ago


The NSE VIX is based on the same concept of VIX that is used to create the CBOE VIX in the Chicago Exchange. The concept is the same to calculate the implied volatility based on the index option prices. VIX is also called the fear index as it indicates the quantum of fear prevalent in the market. Let us now see how this indicator works.

A rising VIX indicates that traders expect the NSE Nifty to become more volatile. The higher the VIX, the higher the fear, which, according to market contrarians, is considered a buy signal. However, traders look at VIX different and prefer to stay light in the market when the VIX goes too high. Ultimately it is a matter of perspective.

A falling VIX indicates that traders in the options market expect the Nifty Index to trade more quietly. In the same manner, the lower the VIX the lower the fear and that indicates a more complacent market. Here again the traders and the investors look at VIX differently. While traders focus on the signals from the VIX, the investors prefer to often take a contrarian view.