Retail investors in derivatives at record in August
MUMBAI : The markets regulator’s attempts to warn retail investors about the risks of trading in derivatives appear to have fallen on deaf ears. The number of retail participants trading in derivatives on the National Stock Exchange (NSE) of India Ltd, the country’s largest stock exchange, hit a record in August. Market participants said the surge was fuelled by the growing popularity of relatively cheaper zero-day options, which expire daily.
The number of retail investors trading primarily index options on four out of five trading days on NSE hit a record 4 million, up from 3.7 million in July and well above the average 2.8 million per month in 2022-23, according to NSE data. With BSE launching Sensex options in May this year, there is an expiry every day of week. However, only the NSE investor count is being considered here.
“Retail interest in zero-day options has been increasing and has hit a crescendo so far this fiscal (2023-24) with markets breaking out of the December high," said Chandan Taparia, vice president (derivatives and technical research), Motilal Oswal Financial Services Ltd (MOFSL). “The popularity of daily index options is evident in BSE also launching weekly Sensex options from May this year." Options are instruments which facilitate the purchase or sale of underlying assets at a fixed price for delivery on a future date. As indices cannot be delivered, they are cash-settled.
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