The National Stock Exchange (NSE) will soon start derivatives (Futures and Options) on India VIX – India’s Volatility Index which is a measure on investor’s fear at a given point of time. NSE was disseminating the product since last one year which was calculated the end of the day but now NSE has started to disseminate the real time quotes as well which can be checked here. Securities and Exchange Board of India (SEBI), India’s market regulator, has given permission to the stock exchanges for starting derivatives based on volatility index. See this. NSE will be submitting the application to SEBI to start the F&O contracts based on India Vix soon. See the press release by NSE.
The volatility index called the India VIX, indicates the investor’s perception of the market’s volatility in the near term. The index depicts the expected market volatility over the next 30 calendar days. i.e. higher the India VIX values, higher the expected volatility and vice-versa. I believe that derivatives on Volatility Index (India Vix) would be a good tool to hedge the risk as investors can monitor the fear factor in the market.
As per Mr Ravi Narain, MD & CEO, NSE – “In the last few years, markets around the world have seen higher volatility. India is no exception and it has also witnessed higher volatility. Once India VIX is available for trading after regulatory approvals, it will give a lot of security to investors and traders, who face uncertainty, because the new product will empower them with better information and foresight. More importantly, it will give them the ability, to use the product to hedge their portfolios against the risk arising out of volatility.”
Thus, introduction to derivatives on India Vix is just around the corner. Be ready for it.