Dr. Nandan's Dilemma: 'Options' in Volatile Markets

Code : INB0008

Year :
2011

Industry :Portfolio Management, Finance Services, Stock Broking

Region : India

Teaching Note:Available

Structured Assignment :Not Available

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Options Trading: Rising Sun Next morning, Nandan went to Gurvirís local office and spoke to Arpit, who explained to him about options trading and the different types of volatile options or market neutral strategies that would help in a volatile market. Arpit also gave details on how options trading gained recognition in recent times and especially in the last two years.

Arpit informed that in January, 2008, options trading contributed only 10% of the total turnover of the Futures and Options (F&O) segment on the National Stock Exchange (NSE) . This contribution jumped to 16% and then 45% by the end of FY08 and FY09 respectively (Refer to Exhibit I for share of options trading in Future & Option turnover at NSE).

Market Trend and Option Strategy Nandan was quite surprised as well as excited about the information he received from Arpit He asked Arpit about the appropriate time for using options strategies. Arpit replied that, "It is not about the right time. It is all about your perception about the whole market or a particular stock. However, there are certain events such as result of a case filed against the company, effects of central or state government budgets on the company, company's quarterly or annual results, out come state and/or central government elections, etc, in which we can use a particular strategy."...

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