SEBI allowed to extend F&O trading till 11:55 p.m from Oct. 1.

[headstrong007]

I have read details of Options Pricing: Black-Scholes Model from various sites.
T => time until option expiration expressed as a percent of a year. Input is on EOD basis, ie number of days. So probably whether it is 6 hr market or 15 hr value of T (in days) remains the same.

On the other hand, volatility is going to drop significantly for sure. So option premium will significantly decrease. Bad news for option writers.

Another good news option buyers premium decay per hour will be less. The bad news is the volatility drop, the chance of bigger sudden move will be lower then.
Most importantly average Profit & Loss percentage per option trade is going to decrease due to volatility drop. In the beginning options, traders might face difficulty in adjusting. Boring range bound phases will increase.

Wild premium/discount change in the future contract will decrease too.
Scalping with future will be easy. There will be more rangebound phases like the commodity market. Scalpers can target such phases.

 

[headstrong007]

In my opinion I think the exchanges should test the water with index derivatives first, and after that they may extend stock derivatives. It will help the traders to adjust to the new timings and also option geeks in a phased manner.

I have expressed a similar view but for the different reason. In the early days, liquidity @Night will be low until extended trading hour gains popularity. Only Index F&O in initial stages will concentrate all possible volume on few contracts. It's good for better liquidity and lower bid-ask spread.
After popularity Stock F&O might be introduced in the phased manner. Like Nifty 50 stocks first, then more liquid high volume stocks etc.

 

[Just-Trade]

I have read details of Options Pricing: Black-Scholes Model from various sites.
T => time until option expiration expressed as a percent of a year. Input is on EOD basis, ie number of days. So probably whether it is 6 hr market or 15 hr value of T (in days) remains the same.

On the other hand, volatility is going to drop significantly for sure. So option premium will significantly decrease. Bad news for option writers.

Another good news option buyers premium decay per hour will be less. The bad news is the volatility drop, the chance of bigger sudden move will be lower then.
Most importantly average Profit & Loss percentage per option trade is going to decrease due to volatility drop. In the beginning options, traders might face difficulty in adjusting. Boring range bound phases will increase.

Wild premium/discount change in the future contract will decrease too.
Scalping with future will be easy. There will be more rangebound phases like the commodity market. Scalpers can target such phases.

You have written about on probable impacts on options. Could you please say something from the point of Futures, as I am an Index Future Trader.

Just-Trade

 

[headstrong007]

You have written about on probable impacts on options. Could you please say something from the point of Futures, as I am an Index Future Trader.

Just-Trade

Possible effect on Future Trader:-

Not to worry about future as comparatively very less premium attached to it. Volatility drop would decrease premium too.
I saw main advantage is for day traders where they can use a various intraday leveraged product like MIS, BO, CO for much longer times.
The longer trading hour will increase day trading activities more and the requirement for positional trade will decrease. As future market will cover most of the times of day 15 hrs out of 24 the requirement for positional trade will also decrease. Oi volumes might be dropped compared to total trading volumes. This is the significant change, that market would cover 62% of the whole day (24hrs) than current 25%(about 6hr market)
More scalping opportunity will arise, but the size of the bigger movement(in percentage) will decrease.

**************
Possible effect on Option Trader:-

Option Traders will face more difficulty than future. Current price action movement in option segment will change as volatility will significantly reduce. Option sellers also take big profit from volatility drop or rise especially overnight profit from option selling, which will decrease significantly as the gap up down chance will decrease. Just like the opposite side of the trades, option buyers will face less profit, less movement also.
Options traders will get the new opportunities of trending move @evening or night if aware of the fact of important world economic news release and price action near closing of FTSE market and the opening of DOW.
**************
In general,
Smart and educated traders who follow the other world market, geopolitical events will get the new edge as our market will align globally. Traders who follow FTSE and DOW chart and other world economic events will get more opportunity @Night.

 

[afin]

Possible effect on Future Trader:-


**************
Possible effect on Option Trader:-

Option Traders will face more difficulty than future. Current price action movement in option segment will change as volatility will significantly reduce. Option sellers also take big profit from volatility drop or rise especially overnight profit from option selling, which will decrease significantly as the gap up down change will decrease. Just like the opposite side of the trades, option buyers will face less profit, less movement also.
Options traders will get the new opportunities of trending move @evening or night if aware of the fact of important world economic news release and price action near closing of FTSE market and the opening of DOW.

**************
In general,
Smart and educated traders who follow the other world market, geopolitical events will get the new edge as our market will align globally. Traders who follow FTSE and DOW chart and other world economic events will get more opportunity @Night.

I agree with the general knowledge aspects affecting market direction. @headstrong007, do you also think option buyers will be effected even if they book low? Like in the 7 to 10% bracket?

 

[afin]

The reason I ask this is I am primarily an options buyer and I tend to book low. I am satisfied with small 7% to 10% scalps on flat trading days as well. So you see my quandry!

 

[headstrong007]

I agree with the general knowledge aspects affecting market direction. @headstrong007, do you also think option buyers will be effected even if they book low? Like in the 7 to 10% bracket?

Obviously, options traders, both buyers and sellers will be affected as Intraday Volatility plays a significant part on option premium. The present movement size is going to decrease.
Yes, new profit target will be smaller, but, how small will depend on the percentage based movements. We, need to see new price action to fine-tuning strategies, set/reduce new profit and loss target.

I am also eager to see new price action in Weekly Bank Nifty options which has big volatility. As gap up down fear decrease volatility in bank nifty will also decrease.

 

[headstrong007]

I agree with the general knowledge aspects affecting market direction. @headstrong007, do you also think option buyers will be effected even if they book low? Like in the 7 to 10% bracket?

More specifically if current profit loss target is 7-10%. We have to reduce it percentage wise, depending on how much movement size is decreasing.
Say Average intraday movement is about 30% now, where u are targetting 7-10% which is 20-30% of total movement. Now, movement size reduced to 20%, your target will also be going to reduce in the same percentage, ie 20-30% of 20% is only 4-6%.
We, need to find out the possible effect on new movement in percentage first, then we need to adjust all things mathematically.

 

[afin]

Obviously, options traders, both buyers and sellers will be affected as Intraday Volatility plays a significant part on option premium. The present movement size is going to decrease.
Yes, new profit target will be smaller, but, how small will depend on the percentage based movements. We, need to see new price action to fine-tuning strategies, set/reduce new profit and loss target.

I am also eager to see new price action in Weekly Bank Nifty options which has big volatility. As gap up down fear decrease volatility in bank nifty will also decrease.

Thanks! I am eager to see the price movements in BN as well post Oct 1. With reduced volatility, it could be a better option, atleast for guys lik me who like NIfty options better.

 

[cloudTrader]

I don't think Exchanges will be very eager to extend the time from October 1st itself. This is not a welcome step for many big brokers (traditional), so they might oppose this move initially.