IndiaVIX Calculation Method

TradingFunda

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#1
INDIAVIX A simple layman explanation of VIX;

It is a measure of expected volatility over the next 30 days;

It is calculated using the nearest monthly expiry calls and puts;

For eg, if VIX is at 50, it means that the expected annual change of Nifty over the next 30 days is at 50%;

this means that Nifty is expected to be in the range of +50% to -50% from the current level for the next 1 year for the next 30 days.

In other words, from the current level of 9111, the range that is implied by VIX is 4555 to 13667

Expected range for the MONTH as implied by VIX is 50% / sqrt (365/30), which is 14.36%, ie 7802 to 10419

expected range for a DAY as implied by VIX is 50% / sqrt (365), which is around 2.62%, ie 8872 to 9349
 
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