India today joined a growing list of Asian-Pacific countries providing investors a way to hedge against stock market volatility.
On Wednesday, National Stock Exchange of India Ltd., the country’s largest stock exchange by trading volume, launched a futures contract tied to volatility in its benchmark CNX Nifty stock index.
The index typically gains value when stocks fall and vice versa, and is used as a gauge of fear in the market, thus also called the fear index. Futures and options on VIX have been around for more than seven years, and their popularity has grown lately.
Specifications:
Instrument name – INDIAIVX
Lot Size – 750
Expiry date – Every Tuesday.
Contract cycle – Weekly – 3 serial contracts. New fut contract will be introduced for every week.
Contract value – 10 Lacks
Price steps – Rs. 0.25.
Daily close price – Volume weighted average fut price of trades in last 30 min.
VIX value – will be computed upto 4 decimals with a tick value of 0.0025.
Vix futures are considered to be a better hedge than a index future.This is because Vix indices are more volatile and offered three to four times more returns than an asset based index. The recent 5.4 per cent drop in the Nifty between January 23rd 2014 and February 13, 2014 resulted in a 14.8 per cent change in the volatility index.
really good informative article. keep it up
prasan jain
Thanks Sir
Rgds,
Bramesh