India VIX is a volatility index calculated from Nifty option prices. It shows the market’s expected volatility over the next 30 days, expressed as an annual percentage.
Turning VIX into an expected move
A rough guide: divide VIX by the square root of 12 to get the expected one-month move. With VIX at 14, that is about 4 percent. With VIX at 24, it is about 7 percent. This is an estimate based on a normal distribution, not a forecast.
How traders use it
- High VIX: premiums are expensive. Buyers pay more and sellers are paid more for the same strikes.
- Low VIX: premiums are cheap. It can be a good time to buy protection.
- Sudden spikes: often come with sharp falls in the market. They tend to fade as fear subsides.
What VIX does not tell you
VIX does not tell you the direction of the market, and a low VIX does not mean a big move cannot happen. Use it to judge how expensive options are, not as a buy or sell signal.
This article is for education only and is not financial advice. Options involve risk and are not suitable for every investor.