I want to take the opportunity to clarify one aspect of the Vix formula.
In the last two expiries, the Vix formula has not come close to meeting it’s targets as we had in Feb, March, April and May.Why?
Quite simply,because the calculation is based on the VIX and the Open Interest, with the open interest being the dominant partner.The VIX is a measure of the volatility of an index or any script. Through it we can get an idea of how much our asset can move in a day or any other time-frame of our choice.The formula we have breaks down this time frame for you.Now on expiry day, when options have to be settled ( as these are European) the Open Interest can be used along with the range to get a fair idea of where we close. It will work 10/10 times, provided the Open Interest is resolved.
Today I was watching the 5400 strike all day, but showed no sign of resolution. In the end we had two winners with the PE writers as well as several CE writers ending in profit.
Along with the Vix and the Open Interest, we have added another potent tool in Market Profile. Two days back in this post here I had called for 5382 to be defended. Quite simply because it was the monthly Point of Control or the place where buyers and sellers agreed on value for the month.
When options become more liquid here and we have a strike price every ten points instead of the current 100, as we have for the US SPX Index in the SPY, our tools will be more reliable. Promise!
Here’s a look at the August future, from where we have to take levels from tomorrow :
The best trade today was in the bank Nifty, but there were several others like Axis bank, Tata Motors, SBI which were having very good market profile set-ups.
I made 15 points in a Nifty trade all day today, but made 17 points in Axis bank and 14 points in tata motors in minutes all in high probability trades.
We looked at the Nifty and the Bank Nifty so far, but it is clearly time to unleash our wonderful methodology on other setups and on a new platform too !!