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Tag: vix

  • What Market Volatility Indicators (VIX & IV) Are Telling Long-Term Investors Right Now

    Some days, the market moves slowly. Other days, it moves like someone lit a match under it. Up 200 points in the morning, down by lunchtime, and back in the green before the last bell rings. For long-term investors, this can be disorienting—not because they’re watching every tick, but because it makes it harder to know when to step in or sit still.

    Over the last few weeks, India’s equity markets have looked surprisingly strong on the surface. Nifty recently touched new highs. Sensex didn’t lag far behind. But underneath that strength is something else—a subtle tension that doesn’t show up in price alone.

    To see that, you need to look at two things: the Volatility Index (VIX) and Implied Volatility (IV). Neither of these are magic tools, but they do help you feel the undercurrent. And in a market that’s moving like this one, that undercurrent matters.

    What Is the Volatility Index (VIX)?

    Think of VIX as a mood meter for the whole market. It doesn’t tell you whether stocks will go up or down—it tells you how much movement investors are expecting, regardless of direction.

    A low VIX usually means people are calm. They expect the market to move slowly, if at all. A high VIX means tension. Maybe people are nervous. Maybe they’re uncertain. But they expect more motion—more swings. VIX is calculated based on Nifty options. If option prices start rising, it often means people are paying a premium to protect themselves from big moves. That pushes VIX higher.

    So when the market hits a new high, but VIX also ticks up? That’s a clue. Something doesn’t line up.

    What Is Implied Volatility (IV)?

    Now let’s zoom in a little. IV is like VIX, but more specific. It applies to individual stocks or particular options, not the entire market.

    If IV is high for, say, Reliance, it means traders think Reliance might swing sharply in the near future. If IV is low, they’re expecting it to stay steady. IV isn’t about what has happened—it’s about what might happen. It’s based on current option prices. And like VIX, it’s a reflection of expectation, not direction.

    So What Are These Indicators Saying Right Now?

    Here’s where things get interesting.

    As of late June, Nifty crossed 25,200. It looked strong. Momentum was there. But VIX stayed in the 12–14 range—low by historical standards. Meanwhile, implied volatility for some large-cap options—like Nifty weekly contracts—rose to around 15.5%. That’s a mixed signal.

    It suggests that even though the broader market seems stable, option traders are building in the possibility of sharp moves. And they’re not doing it for fun. They’re doing it because they’ve seen enough uncertainty—globally and locally—to hedge. For a long-term investor, this can feel like noise. But it isn’t. It’s context.

    The Calm Surface Isn’t Always the Full Story

    Let’s take a step back.

    Imagine you’re standing at a beach. The water looks calm. But someone who understands the tide will tell you: look at the pull, not the splash. That’s what VIX and IV offer. When the market rises with low VIX but high IV, it means there’s unease behind the optimism. People are buying, yes—but they’re also covering themselves, just in case. And for a long-term investor, that doesn’t mean “exit.” It just means: walk in with your eyes open.

    How Should a Long-Term Investor Interpret This?

    You don’t need to react to every tick. But you can use volatility cues to pace yourself.

    If you were planning to make a large lump-sum equity investment, and IV is spiking? Maybe split it up over a few weeks. Not because something’s wrong. But because the short-term ride might get bumpier. If you’re holding a good stock, and it dips on no news—but IV was already elevated? That tells you the dip wasn’t random. It was expected. That can stop you from panic selling.

    And if you’re adding to a position you believe in, and both IV and VIX are low? That’s calm water. No guarantees. But you’re likely entering without turbulence.

    When to Watch, Not React

    Markets today are reacting to a lot of signals:

    • Middle East tensions
    • Currency fluctuations
    • Index reshuffles
    • Crude oil spikes
    • FII inflows and exits

    That’s a lot of noise. And VIX/IV don’t cut through it. But they do frame it. They let you ask: is this movement expected, or is something new happening? That question, more than any indicator, helps long-term investors stay patient.

    Tools That Show You the Picture—Not Just the Price

    If you’re using a mobile platform like Zebu, the data isn’t buried. You can check Nifty’s implied volatility. You can view VIX levels. And you can toggle option chains to see where the highest premiums are sitting.

    That kind of access isn’t about trading more. It’s about watching better. For example: if an option is trading with 18% IV but the stock has barely moved in three days, that’s a clue. There’s tension—just not visible. You don’t need to act. You just need to see.

    It’s Not About Prediction

    This bears repeating: VIX and IV don’t predict market direction. They show expectation. It’s like watching clouds form. Doesn’t mean it’ll rain. But you carry an umbrella anyway. Long-term investors aren’t expected to trade on volatility data. But understanding when the market expects volatility? That’s just good awareness. You avoid overconfidence. You avoid surprise. You hold your positions with more comfort.

    A Note on Extremes

    In 2020, during COVID’s early months, VIX hit 70+. That was pure panic. In 2021, when markets were flushed with liquidity, VIX stayed below 12 for months. Complacency crept in.

    Both extremes carry risk. The sweet spot? Somewhere in between. Enough movement to create opportunity. Not so much that fear clouds judgment. Today, with VIX around 13 and IV hovering near 15–16% on some key contracts, we’re in an odd zone: calm headlines, guarded behavior.

    That makes this a great time to observe, not assume.

    So, What Should You Do Today?

    If you’re a long-term investor, here’s a simple approach:

    • Look at your positions.
    • Check IV levels (they’re usually listed alongside options chains).
    • Take note of VIX (most market platforms display it in real-time).
    • Don’t trade. Just understand.

    You’re not changing your philosophy. You’re just layering in an extra bit of clarity. And in a market like this one—driven by headlines, flows, and technical structure—that clarity might be what keeps you from making decisions you’ll regret later.

    Disclaimer

    This blog is for informational purposes only. It does not constitute financial advice or trading recommendations. Zebu provides tools and data to support informed investing but does not guarantee returns or outcomes. Investors should consult a licensed advisor before making market decisions based on volatility indicators or any other technical data.

    FAQs

    1. What is the difference between IV and VIX?

      The VIX index measures overall market volatility expectations, while implied volatility (IV) shows expected price swings of individual stocks or options.

    2. Is volatility good for long-term investment?

      VIX volatility index spikes can feel scary, but for long-term investing strategies, volatility often creates opportunities to buy quality stocks at better prices.

    3. Is high VIX bullish or bearish?

      A high volatility index usually signals fear and potential market downturns, but it can also indicate attractive entry points for long-term investors.

    4. How does implied volatility affect stock prices?

      High IV often means higher option premiums and market uncertainty, influencing short-term price movements but not necessarily long-term value.

    5. How can investors track market volatility?

      Investors can follow VIX charts, monitor implied volatility, and use news and technical tools to gauge market sentiment and risk.

  • All The Ways In Which You Can Use VIX

    VIX is a contract that you’ve likely heard of if you’ve ever traded futures or options. The NSE VIX futures contracts can be traded in the same way that index and equity futures and options are. To begin, what precisely is a VIX contract? The volatility index (VIX) is a metric for market volatility, thus its name. Since a high VIX implies a high amount of fear in the market and a low VIX suggests a high level of confidence, it is commonly referred to as the Fear Index.

    Examine some strategies for trading the VIX in India and some methods for trading the VIX in general. Do you realise that the India VIX and the Nifty are negatively correlated? What you should know about VIX is summarised below.

    Before we get started on how you can use VIX, it is important that you have the right tools to trade efficiently. That is why as an online trading company we have created a high-end online trading platform with the lowest brokerage for you to maximize your returns from the market.


    It’s important to keep in mind that the VIX measures market expectations for volatility.

    To compute the VIX, VIX typically employs options expiring in the current month and the following month. According to the VIX, it is assumed that the premium on important Nifty options indicates the market’s implied volatility. Because of this, you can get a fair sense of how volatile the options are by averaging them. Expectations of more volatility are typically reflected in the price of options (both calls and puts). Nifty option order books are used to construct the India VIX. When determining the best bid-ask prices, we look at both the near-month and next-month Nifty options. As an indicator of how volatile India’s stock market is projected to be in the following 30 days. This is how the India VIX is computed:

    NSE calculates and distributes the VIX on a real-time basis, hence the formula is only for educational reasons. In order to fully grasp the VIX, it is necessary to understand how it is interpreted and what it means.

    How to use VIX in practise is a more important subject than its simple depiction of projected volatility or risk. This is how you can accomplish it:

    For equities traders, the VIX is an excellent and reliable indicator of market risk
    Stock traders who trade intraday and for the short term might use this information to gauge whether the market’s volatility is rising or falling. They’ll be able to fine-tune their approach. Intraday traders, for instance, run the danger of stop losses being swiftly triggered when volatility is projected to go up sharply. Consequently, they have the option of either reducing their leverage or widening their stop losses.

    For long-term investors, the VIX is a great indicator. Most long-term investors are unconcerned by the volatility of the stock market. The risk and MTM losses of institutional investors and proprietary trading desks, however, are limited. To play the market both ways, they can boost their hedges in the form of put options when the VIX shows a rise in volatility.

    Traders of options can potentially benefit from VIX as an indicator. When deciding whether to buy or sell an option, volatility is typically taken into account. In times of high volatility, options become more valuable and buyers are likely to profit more. Option sellers stand to gain when the VIX declines since more time value will be wasted.

    Volatility trading is also important. Consider buying strangles or straddling if you think the market will be more volatile in the future. However, when volatility is expected to rise, these become extremely expensive. In order to reap the benefits of volatility without having to worry about the direction of the market, you should buy futures on the VIX index itself.

    This index’s volatility is well-captured by the VIX. You can clearly detect a negative link between VIX and the Nifty if you map their movements over the previous nine years from the beginning of VIX. The volatility index (VIX) tends to rise and fall in tandem with the market’s overall performance. Index traders can use this data as an input.

    Portfolio and mutual fund managers can greatly benefit from the VIX index. When the VIX reaches its all-time high, investors can aim to increase their exposure to high beta companies, and when the VIX reaches its all-time low, investors can increase their exposure to low beta stocks.

    Although the India VIX has only been around for a little over a decade, it has already become a reliable indicator of market risk and volatility.

    As we mentioned earlier it is important that you have the right tools to trade efficiently. That is why as an online trading company we have created a high-end online trading platform with the lowest brokerage for you to maximize your returns from the market.