The F&O average daily turnover on the NSE has seen a steady rise over the last few months as high volatility has whetted the traders? appetite looking to make huge gains due to the sharp movements.
The average turnover on the NSE for the period between March and June in the current calendar year surged 22% to R32 lakh crore compared with the average turnover of R26 lakh crore clocked in the same period last year. The month of March saw the highest ever average daily turnover in the F&O segment at R1.64 lakh crore.
According to market experts, the steep and sudden market movements are forcing traders to take new positions and this is driving liquidity in the F&O markets. ?Although, it is a difficult scenario for traders, but if a bet goes their way the returns can be huge. We expect this high volatility to continue in the coming months and give good margins to players. India VIX (volatility index) is expected to remain between 17-20% in the near-term. Apart from this, even the average intra-day movement in the last one-year has been around 78 points,? said Amit Gupta, head (derivatives), ICICI Direct.
Nearly 50 crore contracts have been traded in the options segment this calendar year compared with 12 crore contracts traded in the futures segment. What?s more, nearly five crore more options contracts got traded in the first half of CY13 compared with the year-ago period.
According to market observers, options are preferred by traders as they provide more exposure, while lesser money is involved. ?Trading activity has particularly picked up pace before and after the monetary policy announcements owing to the heightened volatility and uncertainty during this period. The fear surrounding the slowdown in quantitative easing (QE) by the Federal Reserve has also contributed to the rise in implied volatility,? said a derivatives analyst from a Mumbai-based brokerage.
Experts observe that index-based derivatives have been attracting more volumes on account of net buying by both FIIs and DIIs. ?Stock derivatives are largely shunned by investors as index-based derivatives offer more liquidity and better returns. Since March, there has been a steady rise in F&O trading as institutional investors were hedging to deal with the volatility of the results season,? said Rahul Bhandawat, technical analyst, Equentis Capital.