A Study of Nifty & Volatility Index (VIX)

Derivative Data: With 9 trading days to go for the settlement Nifty PCR-1.49 which indicates high Put are bought and normally Option buying is done by retail but with Market being range bound Retail should have written Puts as FIIs data points aggressive buying of Index option while they have been selling Index futures. Market overall Open interest is Rs.1,72,369crs which is matching with January2008 levels Nifty alone has Rs.1,08,755crs of which Nifty Futures Open position is 20,105crs Nifty Option alone Rs.88650crs.

Risk of the market always comes from derivative or leverage trade and legendary investor Warren Buffett's Berkshire Hathaway Inc second-quarter profit fell 40% as declining stock prices depressed the value of his derivative contracts. “Derivatives are financial weapons of mass destruction”, Warren Buffett.

National Stock Exchange volatility index ended on Friday at 16.74 – the lowest level on closing-day basis since its launch in April 2008. The VIX moves down when investors' confidence levels are at high level and rises when fear grips. http://www.thehindubusinessline.com/2010/08/14/stories/2010081452071100.htm