When did vix options start trading
We at Zerodha as usual, will be offering you trading on this new product for free until June 1, Following is our attempt to simplify trading on India VIX for you. CBOE was the first exchange in the world to compute a volatility index back in India VIX is a volatility index based on the index option prices of Nifty. It is computed by using the best bid and ask quotes of the out of the money, present and near month Nifty option contracts.
For example, if India VIX is Historical data for India VIX is available from Mar 02, even though the futures trading starts only on Feb 26, From the Black-Scholes model we know that options price increases with increase in volatility and decreases with a fall in volatility if everything else remains same. Currently, the only way to trade volatility is by buying or selling options calls when did vix options start trading puts as may be the directional bias of the market.
Downside of this approach is that in the real world all other things like time decay theta factorstock price delta factor do not remain constant while volatility is moving. So it becomes hard for a when did vix options start trading to purely trade the volatility with options. Using the India VIX such a volatility trader will be a able to trade much more efficiently. If you look at the India VIX historical data, it is an easy observation that it is not a trending data series but rather an oscillating data series range has stayed between 13 and One such good oscillator to use would be Bollinger Bands.
If you are a technical analyst, you can use other similar oscillators for predicting the move of the India VIX. Love playing poker, basketball, and guitar. Now question arises…which one is best? Let us see one by one. So one can consider buying of VIX at least one week before the election result announcement. Since these contracts expire weekly one has no option than buying the nearest week expiry! But I am not sure if we can square it off on the Election Day as there may many circuit filters!!!
Squaring off next day which will be Monday may result in loss if VIX goes down sharply. But I assume the VIX will remain high for at least some time. Of course options…now when to buy options? One week before election result or two weeks before? I assume VIX when did vix options start trading going to increase a lot from beginning of April and one has to time buying the options at right time.
Bank Nifty options may be very expensive and may not be as liquid as Nifty Options…. Given all this Banknifty still remains lucrative as it is going to zoom more than Nifty.
VIX is a direct play, but the limitation would be that the longest contracts are just 3 weeks old, so if you have to play for the election results from May 16, you can start taking positions only when did vix options start trading last week of April. If you look at the VIX historical chart, the range has when did vix options start trading 13 to 30, but during the election it had spiked upto 60, so if the play is volatility even if VIX is available to be bought at around 30 3 weeks before the event, though it would be on the high end of the range, it when did vix options start trading still be a good bet.
Definitely better to be in options than futures. If you check out the May option prices, the premiums have already factored in extremely high volatility.
Another strategy could be that since so many people are trying to play volatility, and since premiums are so high, you could also simultaneously run a bear call and bear put spread. You can do it on calls and puts at the same time. Is it better to do long strangle now or wait till end of April…. I mean it would be cheap now or then…I understand there are many factors that will play significant role into it such as time value of option and volatility.
But any idea from previous Election data? I think the best bet would be to wait as close to the event as possible and then take a strangle, 3 to 4 weeks before the results. That has historically been the best time to take strangles around the election.
This time around, with the increased popularity of option trading, everyone is trying to play the volatility game, and somehow my gut says that this time around there may not really be that much volatility around the election. I had been doing my research on long strange strategy and decided to study about VIX.
Thanks a ton for sharing your practical experience on the topic. There are number of valid strategies that you can play with as already discussed here but I would like you to note that last date if polling is 12th May monday and result day when did vix options start trading 16th may friday.
Exit poll results will come out on 12th itself. So you need to pay for exit poll results day and not results days as you when did vix options start trading been stressing in your when did vix options start trading and it will make a lot of difference.
Recent assembly polls in Dec saw a lot of spike in volatility and it died down on 5th dec itself even though results came out on 8th Dec. So one other strategy you can consider is go short on volatility on 12th May if you see volatility REALLY running up during election Nithin is skeptical of volatility rise.
This way you will be more sure and also not loose due to big theta of long strangle kind of strategy. I am a registered user of Zerodha trading account as well as tge demat account. My id is ZS and name is ayush sharma. I have one query: Also, pls tell me how do i put trailing stop losses??
And how to modify the stop loss? Check this post on placing SL order. Also check this video. Weekly Contracts much difficult to handle…. U r great sir. VIX the word itself is so complicated, but you have explained it in a very simple and effective manner. I am very excited to trade. Anyone who needs to read this article to understand VIX futures should stay away from trading them. They are inherently complex instruments and the primary purpose of trading them should be to negate the beta of your portfolio.
Do not energy trading and investing pdf fooled into trading them as easy money. Hi Nithin, Do you see end of retail trading in near future.
I am asking because I have heard that SEBI is trying to reduce margin it means do we need to have atleast half of the margin to trade Nifty Future in future. I think it will kill the market…what do you feel? Arpit, what the article talks about is margin funding norms, basically where people borrow money to buy for stocks for a lot more than what they can buy with the money in their account.
This has nothing to do with the futures trading business. There is no concept of margin funding when trading derivatives. Yes decided, the lot size isand margin required is around 2. It is Rs 2. I have been prepping to develop a simple options trading system.
And how do I back test option strategies?. Kindly throw some light on this. Yes Shankar, Presently as explained in the post above, we have only VIX future contracts, options contract might be introduced in the future.
I am new to stock market. I want to read the fundamentals of stock when did vix options start trading. Can you pl guide me the right material to understand the basic concepts.
A good way to actually start trading I am saying trading not investing is by using technical analysis, a lot more easier to get started. Sir, I have a suggestion, Zerodha has branches in Southern Zone. In India with increase in awareness about financial markets in public, it has become indispensable to enlarge the knowledge horizons about financial markets.
It would help the masses to acquire skills in financial field as well as to have optimum leverage of the available opportunities and skill-oriented labs in achieving their goals of investment. We are not really looking at expanding physically, but we are trying our bit to educate via various online initiatives.
It is seen in your website that Zerodha has launched automated trading in the year Can you pl brief me about automated trading regarding its operation, technical analysis etc. Automated trading is not allowed for a retail trader.
Can you pl brief me about automated trading regarding its operation, technical analysis etc? Hi, First let me introduce myself, I am Sundar from Chennai, trading only in options and making lot of money, at least Rs 10 lakh a month. Second, let me appreciate your effort in making low brokerage venture a reality.
Third, everybody want to buy options ahead of elections to make money. That is actually a wrong strategy. So the buyer usually makes money when there is something surprise. For example, innobody expected Congress coalition to get majority without Left support, that happened, so the markets shot up, option buyers made money.
You may check, option prices for May series onwards are really very high. Assuming that one buys May series Put and Call, he has to pay Rs when did vix options start trading He will make money only when Nifty crosses or fall below Let us see what happens next month. Option buyer pays only premium, option seller pays margin money which is very high. When did vix options start trading buyer has limited risk, seller has unlimited risk. So think basically why should any body want to be on sell side with everything is favorable on the buy side?
Performance - Plain and Simple. I have noticed that calls on the VIX trade at a discount. Is there an arbitrage opportunity? What am I missing? These days, the financial news is littered with talk about the VIX. To keep things simple, it measures the amount of uncertainty in the marketplace.
As the uncertainty increases, the options become more expensive and it costs investors more to buy puts insure their portfolio. Expiration date - The Wednesday that is thirty days prior to the third Friday of the calendar month immediately following the expiring month. The following are the expiration dates for VIX options that may be listed through December Exercise will result in delivery of cash on the business day following expiration.
There are three very important characteristics that make this product different from stock options. First of all, the expiration date is not on the third Friday of the month. Traders need to be aware of the expiration cycle. Secondly, the options are European style. That means that the options can be traded, but they can not be exercised before expiration.
Finally, the settlement is a cash-based. This means that if the option is in the money when the VIX settles, your account will be credited the intrinsic value of the when did vix options start trading. The reason these call options trade below parity price of VIX less the strike price can be seen in the chart. In the last seven years, the VIX has had some large spikes above 30, but that price level does not hold for very long.
Eventually, the market evaluates new information and it calms down. From a probability standpoint, traders believe that the implied volatilities will drop in the next few months. Since the options can not be exercised when did vix options start trading, they can be priced at a discount. If the when did vix options start trading were American-style, there would be an arbitrage opportunity. You could purchase the calls at a discount and exercise them for a cash gain. Obviously, this practice would continue until the options trade at parity.
As of this writing, the VIX closed at There are many articles that are written about the VIX. It is a broad-based measure of uncertainty. Option traders should use this as a gauge and they should be buyers of options when the VIX is low and sellers of options after the peak has been established August This can be a very frustrating product to trade. After the sharp market decline in MarchI waited for a snap back rally.
They traded at a premium and the index was at By mid summer, the volatility picked up and the VIX went up to At that stage When did vix options start trading still had not made any money because the options were trading at a discount. Traders believed that the spike was temporary and the premiums would decline since the VIX had been at historic lows the prior two years. However, these shortcomings do not diminish its value as an indicator. In you piece on VIX and trading under parity.
I am not sure about that. Without looking at the options vs. If one bought call and sld the future, one up and help to exp they should make the difference and collect interest as well.
The futures trade at a discount when did vix options start trading they reflect the expectations for future volatility. I use Vix on a daily basis for confirming trends. Very rarely does that happen. Your blog is very helpful BTW. Will I get into using options? Good luck to those who do…. Option Strategies - Good and Bad!
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