Implied Volatility and Nifty 50 correlation ?

Implied Volatility and Nifty 50 correlation ?

Stock futures May 20, 2019

Implied Volatility and Nifty 50 correlation?

Common Questions Regarding implied volatility?

  1. How to find the direction of Nifty 50 if implied volatility increases or decrease?
  2. How to find the direction of Nifty 50  if India Vix increases or decreases?





  1. Steps to Find the correlating between nifty 50 and India Vix

           Calculating Correlation between India Vix and Nifty 50 Movement.
           For Intraday trading select 5 day data 
           For Swing Trading Select 30 day data 
           For Positional trade select 3-month data
  1. Collect data from India Vix and Index data.
  2. Collect 5-day historical data of India vix. Click on this Link 
  3. Collect 5-day historical data of Index. Click on this Link 
  4. Select closing data of India Vix and nifty 50.
  5. Go to Excel
  6. Paste the values next to each other.
  7. Use Correlation coefficient formula in excel
  8. The formula is  = (Correl select India vix data, select Nifty 50 data)

Result Conclusion

  1. If the value is -1 to -0.8  (Strong Negative) eg. If Vix move up nifty move down
  2. If the value is -8 to -0.5  ( Negative) eg. If Vix move up nifty move down
  3. If the value is -5 to -0.5  (No Trade)
  4. If value is 0.8 to 0.5  ( Positive) eg. If Vix move up nifty move UP
  5. If the value is 1 to 0.8   (Strong Positive) eg. If Vix move up nifty move UP

2. Steps to Find the correlating between Nifty 50 and Implied Volatility

       Calculating Correlation between Implied Volatility and Nifty 50 Movement.
       For Intraday trading select 5 day data 
       For Swing Trading Select 30 day data 
       For Positional trade select 3-month data
  1. Collect data from India Volatility and Index data.
  2. Collect 5-day historical data of Implied Volatility. Link is below you need to collect call and put implied volatility data manually every day. Click on link
  3. Collect 5-day historical data of Index. Click on  Link 
  4. Select closing data of Implied Volatility and nifty 50.
  5. Go to Excel
  6. Paste the values next to each other.
  7. Use the Correlation coefficient formula in excel for call and put side.
  8. The formula is  = (Correl select Implied Volatility data of call side, select Nifty 50 data)
  9. Same for the Put side.

Result Conclusion

  1. If the value is -1 to -0.8  (Strong Negative) eg. Implied Volatility move up nifty move down
  2. If the value is -8 to -0.5  ( Negative) eg. Implied Volatility move up nifty move down
  3. If the value is -5 to -0.5  (No Trade)
  4. If value is 0.8 to 0.5  ( Positive) eg. Implied Volatility move up nifty move UP
  5. If the value is 1 to 0.8   (Strong Positive) eg. Implied Volatility move up nifty move UP

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8 Comments

  1. UnknownSeptember 14, 2019 at 12:45 PM

    which strike price implied volatility is record for correlation ??????????????????????????????

    ReplyDelete
  2. Sachin DesaiOctober 13, 2019 at 12:29 AM

    which side AT the money ? call or put ?

    ReplyDelete
    Replies
    1. Stock futuresOctober 13, 2019 at 9:41 AM

      Option chain implied volatility data of both call side and put side is used to find the correlation with nifty movement. If both call and put side implide voaltility data and nifty data results in same direction it is valid co relation . If call and put side data result in different direction then the correlation is invalid.

      Delete
    2. Sachin DesaiOctober 13, 2019 at 10:41 AM

      thanks for reply. One more question. Which option chain should I refer current expiry or next expiry or monthly expiry for nifty ?

      Delete
    3. Stock futuresOctober 13, 2019 at 11:14 AM

      Monthly option chain data is more reliable. Download the file from this link https://stockfuturesnse.blogspot.com/2019/09/option-chain-historical-data-excel.html . we provide histocial data of option chain on daily basis. If you have any other question on any blog write us back.

      Delete
  3. Sachin DesaiOctober 13, 2019 at 11:59 AM

    Sir I m working professional so could able to do stock swing. I am learning stock market since 1.5 years. I m getting data base done with help my brother who is software developer.
    1. I m considering only FNO stocks for swing, excluding Telecom, PSU (except SBI), Aviation, Oil which narrow down to around 100 stocks.
    2. I have less capital so I could only do is to buy stock in cash market.
    3. I want to include stock option chain and future data in analysis.
    4. which filter should I consider for stock selection, Stock future logic as describe in Blog, or Option Chain or Speculative position in Cash market for same stock ? My target is 5-10 % target or -2% on ROI.

    ReplyDelete
    Replies
    1. Stock futuresOctober 13, 2019 at 12:12 PM

      This link https://stockfuturesnse.blogspot.com/2019/09/new-f-o-stock-future-important-data.html have different parameters like traded value-delivery percentage. We shared some important tips on blog to filter the stocks for swing trading. Hope you will find some more logics using the data points provided in excel sheet. We update this excel sheet daily and filter out the stocks for trading.

      Delete

Thank you for your valuable comment