With the year coming to a close and trading volumes in the cash segment dropping, traders have been increasingly resorting to take ?call? positions in the options segment of the stock exchange. This can be seen in the falling put-call ratio, critical indicator of the sentiment in the market place. It has now fallen to 0.26 November 2009 from the 0.33 levels in January 2009.

The put-call ratio is one of the popular tools used by traders to check for oversold (more sellers) or overbought (more buyers) zones. When the ratio is high (above 1.00) the profusion of put options suggests investors expect the market to go down. Conversely, a low number (below 1.00) suggests investors expect the market to go up based on the volume of call options.

Call option is an agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. Overall, the volume of call options had decreased from 88.85 crore in January 2009 to 77.40 crore in February and increased thereafter and touched a high of 175.16 crore trades in November 2009. On the other hand, volume of put options did not grow such a fast pace ? from 26.59 crore during February 2009, the volumes touched 45.87 crore in November 2009.

In the case of a put option, the buyer has the right but not the obligation to sell the underlying security at a pre-determined price (called the strike or exercise price) on or before a particular date (expiry date).

Similarly in terms of value, call options have also increased from Rs 12,872 crore in January 2009 to Rs 32,621 crore in November 2009.The total value of put options have grown from Rs 6,004 crore in January 2009 to Rs 11,043 crore in November 2009.

Companies like Reliance Industries, Tata Steel, Suzlon Energy, IFCI and Unitech have seen the highest numbers of call being written. Similarly in terms of value, Reliance Industries, Tata Steel, ICICI Bank ,Suzlon Energy and Unitech, were also the highest grosser in the put contracts segment in November this year.

However, the volumes on the NSE?s cash segment have been falling. The average value of trades in the cash segment is now around Rs 13,200 crore on a daily basis. This is much lower than the Rs 16,500 levels seen in November and Rs 18,000 levels registered in the month of October.

Even in the month of December the volumes on the stock options segment have remained steady with a daily turnover of around Rs 2,000 crore (notional) being recorded.