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Since the last one month INDIA VIX is hovering around 10-12 range. This is historically at a very low range. Average range of INDIA VIX is 14-16, above 17 is considered high. Above 22 is very high. Above 30 it is better not to trade.
Right now at 9.35 am, 11-May-2017, INDIA VIX is 10.7050.
On top of that NSE is showing little movement since last one month. See this image below, Nifty has moved very low from 10-April-2017 to 11-May-2017:
This is just 1% move.
When there is no panic in the markets
VIX gets low.
Volatility is low.
Please note that volatility is the speed of movement. VIX is Volatility Index, which shows the market’s expectation of 30-day volatility. When the market is not expected to move much VIX will obviously fall.
Problems with lower VIX and if markets are stable not moving at all
1. Stocks give returns lower than or equal to Fixed Deposits.
2. Option premiums are low not encouraging Option Sellers to Sell as they get less for more risk.
3. Option buyers are at more risk as the lower premiums lure them to buy more options at the same cost. But when markets are not moving at all, the premiums gets evaporated and buyers in hope of a move keep the trade on hold. End results – option expires worthless and all their money goes down the drain. It becomes ZERO.
4. Trading becomes boring. See this, a major investment firm in USA tweeted this:
Same happening in India too as seen in the image above.
Does low VIX a sign of a Storm?
Most of the times it does happen. In stock markets whatever goes down has to come up and whatever goes up has to come down. So if not today, may be tomorrow or later VIX has to rise, and since stocks markets are inversely proportional to VIX, if it rises stock markets will fall.
Rich investors will hedge their portfolio against a fall.
Some mutual fund managers also hedge their funds.
Retail derivative traders who know hedge also hedge, but as most do not know are option buyers. In times like these money of option buyers goes to rich stock investors who hedge their investments, hedge fund managers and smart derivative traders who know hedging methods.
To end, I can only say is if you are an option trader and do not know how to hedge you are doing a big mistake.
Whether it is high volatility or low volatility, high VIX or low VIX, hedging is something that almost always helps you in trading properly and increasing your winning ratio.
My hedging course will help you to learn good hedging methods.
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What you should do now1. If you have still not subscribed for my free 5 days course you can do by filling the form above. You will learn a lot about option trading.
2. If you are a new option trader, not much experienced and are making losses you can do my paid course. I recommend Nifty Conservative Option Course for beginners because it is easy to understand and easy to trade. Even a 18 year old young trader or a housewife can learn it and start trading from next day. It will help you to earn consistent monthly income without any software or speculation or stress or big risk. You will learn proper hedging strategies that works in any market condition.
3. If you are banknifty weekly options trader you can do my Bank Nifty Weekly Options & Futures Strategy Course. You will learn future and option hedging strategies that works in volatile market condition.
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Here is complete process of my course1. Once you pay I will send you the course materials for studying to your email.
2. You read and ask me questions via phone/whatsapp/email to clear doubts.
3. Then you start paper trading and still can ask me questions.
4. After about one month you can start trading.
5. Since doubts can come anytime the support will be there for one year.
Within one month you can start trading on your own. No need to depend on anyone once you are on your own.
If you have any question you can contact me.
You can read about me here and my trading mistakes here.
Dilip Shaw, Founder
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