An employee walks past a signage for the CNX Nifty Index displayed on the National Stock Exchange of India building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Nifty 50 Weekly Options Makes A Stellar Start

The weekly options contract on the NSE Nifty 50 Index had a stellar start on Feb. 11, with option volumes surging on the first day of trade.

The Nifty 50 Index closed the day at 10,888, and weekly option volumes for strikes that are closer to the spot level recorded more than 60 percent of the cumulative volumes on that strike, according to data available on Bloomberg. The 10,850 and 10,950 strikes accounted for more than 75 percent of the cumulative volumes, with the monthly options making up the remaining 25 percent.

The Nifty 50 weekly options, according to a statement by the National Stock Exchange, will have seven consecutive weekly expiry contracts (excluding the week where monthly contracts expire). On expiry of a weekly contract, the exchange shall introduce next weekly contract on rolling basis.

The existing three monthly options contracts, three quarterly and eight semi-annual option contracts will also continue to be available. The contracts shall expire on Thursday of every week. In case the Thursday is a trading holiday, the previous trading day shall be the expiry/last trading day. The strike interval for the weekly options will remain the same as monthly contracts.

The weekly options on Nifty 50 Index provides an additional hedging tool for market participants to manage the portfolio risk more effectively, the statement quoted Vikram Limaye, managing director and chief executive officer of NSE, as saying.

The Precursor: Bank Nifty Weekly Options

The NSE launched the weekly options on the Nifty 50 Index following the success of Bank Nifty weekly options, which were launched in 2016.

The Bank Nifty Index options recorded a 98 percent jump in trading volumes between January-December 2018 over the corresponding previous period, and is now the world’s most traded index option, according to Futures Industry Association data.

Options trading contributes the most to trading volumes on the Nifty 50 index, at over 80 percent.