NIFTY IV Rich / Cheap Heatmap — Live
Every NIFTY strike's implied volatility measured against a quadratic smile fit — the dislocations where an option is trading rich or cheap relative to its neighbours.
Top 6 IV dislocations (strike · actual · fit · deviation)
📊 Live visualisation
What the IV heatmap shows
Implied volatility is not one number for NIFTY — it varies by strike, tracing the volatility smile (or skew). Individual strikes wander off that curve because of flow: a fund rolling a hedge, retail piling into a round-number call, a market maker widening a quote. This page fits a smooth smile through the ATM ±10% strikes and measures each strike's deviation = actual IV − fitted IV. A positive deviation is rich (the option is priced above what the smile implies); a negative deviation is cheap. The hero card reports the largest rich and cheap dislocations currently on the NIFTY chain.
How the smile is fitted
The fit is a quadratic in moneyness: IV(K) = a + b·(K−S) + c·(K−S)², solved by least squares over the call and put IVs in the ATM ±10% band. The three coefficients have meaning: a is the ATM level, b is the skew (the tilt — negative b means downside strikes carry more vol, the normal index state), and c is the curvature (how much both wings are bid up — a kurtosis or crash-premium term). R² measures how much of the strike-to-strike variation the smile explains: above ~0.9 the deviations are trustworthy; a low R² means a noisy or thin chain, so treat the rich/cheap calls with caution.
Reading rich and cheap
Each row shows a strike's actual IV, the fitted IV and the deviation, flagged rich or cheap. Rich strikes cluster at round numbers with heavy open interest — compare with [OI analysis](/oi-analysis) and the [GEX walls](/gamma-exposure) — because demand for protection or lottery tickets concentrates there. Cheap strikes are sometimes genuinely mispriced, but often they are simply illiquid: a wide bid-ask spread lets the last trade sit below the curve. Always check the quote depth before assuming an edge.
Trades that use smile dislocations
The classic use is relative value within the same expiry: sell the rich strike, buy the cheap one as a vertical or ratio spread, or centre a [butterfly](/butterfly-scanner) on a cheap strike so the wings are bought below the curve. Across expiries the same idea becomes a calendar — see the [volatility surface](/volatility-surface) for the term structure. Size these trades small: dislocations can persist for days when institutional hedging flow is the cause, and a 1–2 vol-point edge is easily eaten by spreads.
Limitations & cadence
IVs here are solved from last-traded prices, so a stale print distorts its strike until it trades again. The fit uses the current expiry only and refreshes every 60 seconds on this public page (5–15 seconds inside /dashboard). Far wings carry wide spreads and are excluded beyond ±10% of spot. Nothing on this page is a recommendation — OptionAlgo is not SEBI registered and publishes educational data intelligence only.
Frequently Asked Questions
What is a rich strike?
A strike whose implied volatility sits above the fitted smile — the option is priced higher than its neighbours imply. The deviation column shows by how many vol points.
Why a quadratic fit and not something fancier?
Over the ATM ±10% band a quadratic captures level, skew and curvature with three interpretable coefficients and stays stable on a discrete, noisy chain. The R² tells you when it is not enough.
What does R² tell me?
How much of the strike-to-strike IV variation the smile explains. Near 1.0 the deviations are meaningful; well below 0.9 the chain is noisy and the rich/cheap flags should be discounted.
Are cheap strikes always worth buying?
No. A strike can look cheap because it is illiquid and its last trade is stale, or because its bid-ask is wide. Check depth and spread before acting.
How is the IV computed?
Solved from each option's last traded price with the standard Black-Scholes inversion using the live spot and time to expiry, then fitted across strikes.
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