IN an effort to revive derivatives trading, the Bombay Stock Exchange (BSE) has decided to start weekly options from Monday. Initially, weekly options will be available on the benchmark index Sensex and select scrips.
The benefits of weekly options are that they will command lower premium due to shorter maturity and cost less than the monthly options.
The BSE in a statement on Saturday said this (weekly options) has been introduced to cater to a demand for shorter maturity options (normally Monday to Friday). This is in addition to the existing series - mainly the stock and index options offered for near, middle and far contract month series. For the September month, one- and two-weeks options will commence from September 13, which will expire on September 17 and September 24, respectively. On September 20, another two-week maturity option will commence, which will expire on October 1 and so forth. If the expiry of weekly options falls on a trading holiday, then it (as per SEBI guidelines) will be on the previous trading day.
Since the launch of derivatives trading in June 2000 on the BSE, this segment of the exchange has not been able to show a growth similar to the National Stock Exchange. In the last few months, the volume in the derivatives segment of the BSE has been negligible.
According to the BSE, the benefits of weekly options are that they will command lower premium due to shorter maturity and cost less than the monthly options. They will also provide an opportunity for arbitrage between one week to maturity and two weeks to maturity options, weekly options and monthly options.
On account of low cost, the liquidity will improve, as more participants would come in. They will also lead to better price discovery and improve market depth, the statement said.
