VIX slump to a 9-month low catches punters short

MUMBAI: Derivative traders who were expecting market volatility to increase and had created aggressive short positions in run up to the US Federal Reserve rate hike event were caught on the wrong foot, as the index to measure volatility of fear gauge meter, NSE India VIX dropped 15% to hit 9-month low on Thursday.

Traders who had constructed complex strategies, including selling Nifty futures, and buying put options expecting prices to increase have lost money. Many were forced to cover their short positions as markets moved higher. Call option writers, who did not expect Nifty to rise higher than 7800 levels, have also lost money.

“The markets have run up sharply over past few days, but we expect Nifty to consolidate going forward and see December expiry around 7800 levels,” said Jitendra Panda, CEO, Peerless Securities.

Nifty 7500 put option where the market concentration was the highest with 57.50 lakh shares, witnessed over 23 lakh shares being unwinded or positions being closed. The put option price of this particular strike dropped nearly 75% to `8.05 on Thursday; most of the bearish investors were active at this strike price.