Index options trading swells to record high in Oct amid heightened uncertainty
Subscribe to enjoy similar stories. MUMBAI : Index options trading on the National Stock Exchange (NSE), the country's largest stock exchange, hit a record high based on the number of contracts traded in October, which saw a 6% pullback in the bellwether Nifty amid tepid earnings growth, rising tensions in the Middle East, and uncertainty over the US presidential elections.
The jump in participation comes weeks ahead of regulatory restrictions to curb retail frenzy in weekly index options trading. October'sheightened volatility led to greater participation, with the number of index options traded on the NSE hitting a record high of 12.74 billion contracts.
The rising market uncertainty was reflected by fear gauge India VIX, which rose by 71.5% from a low of 9.47 to a high of 16.24 during the month. The Nifty fell 6% in October to 24,205.35 due to foreign investors' record selling of over ₹1.13 trillion amid near-flat September quarter results, building tensions between Israel and Iran, and uncertainty over the winner of the US presidential race then.
As the markets turned volatile, falling from a record high of 26,277.35 on 27 September, participation increased in indices such as the Bank Nifty and the Nifty, the two most popular index options contracts among market constituents, surged, according to market investors. “More trades tend to happen when markets turn volatile," said the head of a large discount broker.
"We believe, though, the Sebi (Securities and Exchange Board of India) restrictions, which kick in on 20 November, will trim the volumes by around 15-20% even as the volatility spills over from the last month to this one." Independent market analyst Ambareesh Baliga agreed. “At times when markets turn
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