Market fear gauge VIX sees sharpest fall in 5 yr before change in Nifty lot size
₹90,000 a lot from ₹1.8 lakh for traders of futures contracts and sellers of options contracts. “This could result in increased volumes by participants and narrowing bid-ask (buy-sell) spreads. As VIX is calculated based on index options’ bid-ask spreads, the narrowing spreads will result in lower VIX levels," explains Modi.
"The reduction in lot sizes is a key factor behind the falling VIX," said director of Equity Strategy at Wealth Mills Securities. "This, combined with a market tightness, particularly at higher levels, suggests potential exhaustion, further contributing to the lower volatility reading." Index options are a big hit among retail, high networth individuals (HNI) and proprietary traders. In notional terms, index options volumes accounted for 98.4% of the ₹79,928 trillion notional turnover of total derivatives contracts on NSE.
The share of prop traders stood at 59.6% of gross notional turnover in April-February FY24, followed by individual investors (26.3%), foreign investors (5.9%), corporates (3.8%), DIIs (0.1%) and others (4.3%). Current level of India VIX stands at 10.27 against the one-year average of 12.44. The Nifty lot value is kept within ₹5-10 lakh.
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