Abstract
National Stock Exchange was ranked foremost for trading of individual futures stocks in the year 2007. Since then trading of stock futures has witnessed a tremendous growth in India. Futures and options instruments have not only emerged for trading but also to minimize the risk associated with stock price fluctuations. Index, stock futures and options are based on monthly, bimonthly and quarterly contracts which expire on last Thursday of the month. The scope for studying futures and options has gained prominence with the introduction of weekly option contracts of Bank Nifty and Nifty Index Option at National Stock Exchange. It is believed that longer-dated options are more sensitive to the risk of intertemporal shift in any economic environment while shorter dated options are comparatively less risk sensitive. The factors stated above stress upon the need to explore the impact of maturity date on futures and options. Thus, the present study makes an attempt to present a detailed review of literature in this context. The present paper is of threefold. Firstly, it attempts to draw inferences based on literature review in relation to impact of maturity effect on derivatives market in National Stock Exchange. Secondly, it also makes an attempt to bring out the effect of monthly and weekly futures and options contracts. Towards the end, based on the analysis efforts had been made to draw a meaningful conclusion which may be helpful to academicians as well as investors and also may provide scope for further research.
Highlights
Introduction of derivatives is a paradigm shift in the Indian Financial Market with the recommendations of L.C Gupta Committee
Extant literature provides important insights pertaining to the expiration day impact on futures and options market in India
Extant research focusing on Futures and Options contracts examined the monthly contracts and majority studies have examined the futures and options expiration day effect on volatility of underlying market, individual stocks and returns
Summary
Introduction of derivatives is a paradigm shift in the Indian Financial Market with the recommendations of L.C Gupta Committee. Nifty 50 Index futures contract was the first derivative contract launched on National Stock Exchange in India. Futures and Options have registered tremendous growth in the recent past not just for trading and as a tool to minimize the risk which emerges out of stock price fluctuations. Bank Nifty index are known for their high volatility and huge volumes which can be a reason to consider introducing bank nifty weekly options which are more than 2-year-old. With the success of Bank Nifty weekly options, Nifty weekly was introduced in National Stock Exchange recently. Options are another tool in the existing toolbox which is dominant enough to generate quick profits or losses depending upon the usage. The index weekly options can be helpful to the investors to safeguard their portfolio risk in a volatile market
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