Learning 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 80, it means that the expected annual change of Nifty over the next 30 days is at 80%; this means that Nifty is expected to be in the range of +80% to -80% from the current level for the next 1 year for the next 30 days. In other words, from the current level of 8660, the range that is implied by VIX is 1732 to 15588. Expected range for the month as implied by VIX is 80% / sqrt (365/30), which is 22.8%, ie 6680 to 10635; expected range for a day as implied by VIX is 80% / sqrt (365), which is around 4.2%, ie 8297 to 9023.
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