NSE is soon going to start India Vix Futures trading which is going to be the first instrument based on the volatility index for India. It’s a very good product and very relevant for the current stock market conditions and also very necessary for the indian markets to have a product based on the market volatility if we want to make India, a developed and matured market.
The contract specifications like contract lot size, tick values, margin requirements are not yet out but the real question is whether it is going to attract enough liquidity or not? Right now, there are only two exchanges which have successfully launched instruments on the volatility index in the world, VIX by CBOE and VSTOXX by Eurex. Other exchanges tried but failed to make it popular among the traders.
- Germany’s stock exchange, DTB launched VOLAX futures on DAX in Jan 1998 but has to withdraw the product in the same year in Dec 1998. We may say markets at that time may not be ready to accept this product.
- CBOE successfully launched VIX Futures in March 2004.
- CBOE launched DJIA volatility Futures in Apr 2005, continued it for 4 years but has to delist it in Aug 2009.
- Eurex lists futures on VDAX, VSMI, and VSTOXX in Sep 2005 but has to delist each one of them in Jul 2009. VSTOXX however was relaunched as mini again.
- CBOE sucessfully lists VIX options.
- CBOE lists Nasdaq and Russell 2000 volatility futures in Jul 2007 but failed and delist the contracts in Feb 2009 and Feb 2010 respectively.
- Eurex lists options on VSTOXX in Mar 2010.
Looking at the history of volatility index products in the world arena, there are more failures then successes when it comes to instruments on volatility index and hence there is a huge question mark on whether IndiaVix is going to be successful or not. In India, high market volatility and absence of other developed products to hedge volatility risks may make IndiaVix a success. Some other exchanges are also coming up with volatility futures like VKOSPI futures, Japanese VIX futures. Only time can tell if these instruments can attract enough traders to sustain required liquidity and depth.
Further Readings
India Volatility Index Calculations
How India Vix is related to Nifty Options
sir more about links between nifty and vix index
Regards
Bhatt 09050664427
Sir,
Thanks for very informative article.
Kindly elaborate on High, medium and low ranges of VIX India. I have also read that intraday trades should be avoided if Vix is 15-16 or lower due to low expected price movement. Is it right?
Awaiting reply on my mail ID if possible,pl
sir, how to calculate our own retail weightage(%of particiaption) and the time value that we gave to the indian economy(the company) for a single trade in a particular scrip which is not traded in derivatives market?
Could any one tell me what would be the mark to market if I buy IndiaVix July TW 1 futures at 1885 and closing price of this futures is 1885. the spot IndiaVix closed at 1706.
Please reply.
Thanks in advance