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Derivatives Trading in India

Derivative trading in India has emerged as a distinct trading avenue in the last 15 years. Equity derivatives in India were introduced into the main exchanges only in 2001 and actually captured the imagination of traders only after 2004. Derivative trading in India consists of 4 distinct sub-categories viz. Index Futures, Index Options, Stock Futures and Stock Options. The derivatives market volumes on any average day accounts for 80-85% of the total volumes on the NSE with the predominant volumes coming from the Index options segment. Futures and options are essentially risk reduction products but in the Indian context they are also quite popular as trading products.

Why Derivatives trading in India became popular…

There are a variety of reasons for the sudden surge in interest in derivatives. Futures are margin products where one can trade stocks and indices by paying a small margin of 10-15%. Secondly, one cannot short sell equities beyond a day but futures permit you to play the market both ways. Thirdly, many traders look at options as a limited risk product since your maximum loss is limited to the premium and hence one can trade with greater confidence. Fourthly, index options have become very liquid in the last few years due to active institutional participation and that has been assisted by the much lower rates of Securities Transaction Tax (STT) payable on options. Lastly, Indian stock markets have been used to the “Badla” or carry-forward system for many decades on the BSE. Stock futures offer the best proxy for the Badla system. All these factors have helped in the development of derivatives trading in India.

Derivative Summary – Your one stop guide to futures and options…

The derivative summary page on LKP Securities is a quick and scientific guide to derivatives trading in India. The summary typically lists contract that are the most liquid giving you a quick snapshot of where the trading focus of the market is. Additionally, the derivative summary page also captures some important value-added information for the active trader. It captures the volumes in terms of contracts and in terms of total value. Additionally, the screen also captures the open interest (OI) and the shifts in OI. That gives you a quick picture of whether the change in price and volumes is favouring the creation of OI or the reduction of OI.

The derivative summary page on LKP is useful as a derivative ideation tool as well as a position monitoring tool. For those of you who are looking at arbitrage opportunities between the cash and futures market, the basis page can take care of most of your needs. The basis page identifies the arbitrage opportunities on a real time basis and you can execute based on the cut-off. The page also contains a lot of added analytics on Put Call Ratio of volumes, put call ratio of OI, shifts in open interest, OI accumulation trends etc. In effect, a page that summarizes the equity futures and options market in India very succinctly.

Derivative Summary

Inst. Underlying Expiry Date Strike Price(Rs.) Opt.Type LTP(Rs.) OI Contracts Traded(Nos.) Turnover
(Rs.in Cr)
Market Lot

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