Nifty options volumes surpasses US S&P 500 as retail participation soars
Almost nine out of 10 retail investors may be losing money on derivatives trading. But this statistic is not deterring hopefuls from taking a short at the game.The notional value of options on India’s Nifty 50 index has averaged about $1.64 trillion a day this year, surpassing the average daily volumes of $1.44 trillion on the S&P 500 index, according to data from Bank of America research. According to NSE data, retail investors accounted for 35.6 percent of the premium turnover in index options in April this year. They also accounted for 25.5 percent of the notional turnover across the derivatives segment (futures plus options) in the same month. The growing popularity of weekly options, rise in the number of algo trading firms, contracts expiring every day of the week, and a shot at making huge gains without risking a lot of capital and by paying much lower margins than for cash market trades, are some of the factors driving the explosive growth in options trading. With the NSE and BSE locked in a race to boost derivatives trading turnover on their respective platforms, the result has been an increase in the number of contracts available for trading over the past few months. Hero Zero trades Many retail traders are increasingly going for what is known as Hero Zero trades, which means betting on out-of-the-money call or put options on expiry day for a low price. This strategy pays off handsomely if there is a sharp move in the underlying. But if the underlying trades in a narrow range, the premium paid for buying the options is forfeited. Seasoned derivatives traders say most people consistently lose money in buying expiry day options, but the occasional profit tempts them to stay on, in the hope that they may make an even bigger profit next time. Also, the rush of amateur retail traders is turning out to be an opportunity for proprietary trading firms using powerful algorithms. Recently during a court hearing in the US, quant firm Jane Street claimed it earned about $1 billion in revenues in options trading in India in 2023, from one of its proprietary strategies, according to a Bloomberg report. “A key reason for the surge in options trading volumes is the proliferation of algo trading,” said Rajesh Palviya, Head of Derivatives and Technical Research at Axis Securities. “Secondly, the availability of various index options weekly expiry gives intraday traders more choices with different magnitudes. The growth and advancements of high-speed mobile apps have contributed remarkably, especially appealing to Gen Z,” he said. The scope of the frenzy in India is illustrated by the number of options contracts traded, which grew at a CAGR of 52.4 percent from 2013 to 2023, according to a recent Bloomberg report. In comparison, the US, the nearest competitor, saw a mere 10.7 percent growth. India now trades nearly eight times more options contracts annually than the US. Recent posts Nifty options volumes The massive crash in stock indices BSE Sensex and NSE Nifty 50 post the unexpected Lok Sabha… Read More Election results: Retail The massive crash in stock indices BSE Sensex and NSE Nifty 50 post the unexpected Lok Sabha… Read More PM Modi oath-taking PM Modi Oath Ceremony Live: PM Narendra Modi takes oath as the prime minister for the third… Read More 80 smallcaps gain 80 smallcaps gain between 10-64% as market hits fresh high The broader market indices exhibited… Read More 1 2 3 4
80 smallcaps gain between 10-64% as market hits fresh high
80 smallcaps gain between 10-64% as market hits fresh high The broader market indices exhibited robust gains in the volatile week ending June 7, aligning closely with the performance of the main indices, which were influenced by varying general election results compared to exit polls Positive factors such as the Reserve Bank of India’s upward revision of GDP forecast, declining crude oil prices, increased GSP collection, the European Central Bank’s rate cut, and the progression of monsoon rainfall collectively bolstered investor confidence. On the other hand, Jaiprakash Associates, Titagarh Rail Systems, Techno Electric & Engineering Company, TruCap Finance, Cressanda Solution, Data Patterns (India) fell 11-30 percent. Where is Nifty50 headed? Rupak De, Senior Technical Analyst, LKP Securities The short-term trend looks very positive as the index closed near an all-time high. Going forward, the market remains a buy on dips as long as 23000 is not broken. On the higher end, the index might move towards 23500-23600. On the lower end, profit booking might occur only below 23000.” Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities The short-term trend of Nifty continues to be positive. Having reached the overhead resistance of around 23300-23400 levels, there is a possibility of minor dip in the market from the highs in the short term and that could be a buying opportunity. Immediate support is at 22900 levels. Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas On the daily charts we can observe that the Nifty has been inching higher after a sharp decline on Tuesday earlier during this week. It has recovered all the lost ground and is within touching distance of previous all-time high of 23338. The V shape recovery has put the structure in the Favor of bulls and dips towards support zone 22800 – 22700 should be used as a buying opportunity. On the upside the psychological level of 23500 is likely to attract some profit booking at higher levels. Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. Recent posts 80 smallcaps gain Options trade | A strategy to benefit from sideways movement in Reliance Industries Unmesh Kulkarni… Read More Options trade | Options trade | A strategy to benefit from sideways movement in Reliance Industries Unmesh Kulkarni… Read More RBI to change RBI to change course in October-December quarter: Unmesh Kulkarni Unmesh Kulkarni – Managing… Read More Narendra Modi oath-taking: Narendra Modi oath-taking: Three-tier security, 9,000+ guests and other details about the June 9… Read More 1 2 3 4