WITH GROWING ELECTION JITTERS, NSE LAUNCHES VOLATILITY INDEX FUTURES

The National Stock Exchange has launched trading of futures tied to its VIX volatility index, known as the “fear gauge”.

 

This will provide a key hedging tool against uncertainty ahead of general elections and weaker global market sentiment.Trading was active with Rs 1.2 billion worth of contracts trading at 12.00 noon.

The futures are tied to VIX, which is modelled on the Chicago Board Options Exchange`s popular index and measures expected near-term volatility for shares based on prices of options.

Traders expect strong demand for VIX futures. This product will help in hedging uncertainty.India`s broader VIX index, which was launched in April 2008 under license, has become a popular barometer of sentiment for domestic investors.

The launch of VIX futures comes as the broader fear gauge on Wednesday hit its lowest since March 2013. VIX futures should pick up because it`s a new asset class that fits into an investor`s trading needs.

The Nifty has fallen 1.7 per cent so far this year as of Tuesday`s close, compared to a 2 per cent fall in the MSCI index for Asia-Pacific excluding Japan.