Share of 'Options Market' jumps 64%

Share of 'Options Market' jumps 64%

Share of 'Options Market' jumps 64%

“In financial year 2000 and 2001, the game completely belonged to cash market with 100 per cent market share. During that time, the futures market and options market existed just for namesake,” SMC Global Securities said in a report.

In FY 2000, when there was no existence of futures and options market the trading turnover of cash market was Rs 20,67,031 crore. In an option market, investors can buy or sell at a specified price within a period of time. The feature of the options contract for a buyer is that, the buyer has the right to buy, but he may choose to buy or may even choose to cancel the contract.

Meanwhile, the futures market, which had a modest share of 7.4 per cent in FY 2002, has grown to 62.9 per cent by FY 2008. A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price.

In the period between 2000 and 2008, the market share of cash market in terms of trading turnover got reduced to as small as 27.8 per cent in FY 2008 from 100 per cent in FY 2000.

In FY 2008, the trading turnover of cash market was Rs 51,29,894 crore, where as that of futures was at Rs 116,11,499 crore, and the options market was at a massive Rs 17,21,287.3 crore.

“Between FY 2000 to FY 2008, the market share of options market has grown from 2.9 per cent in 2002 to 9.3 per cent in 2008, driven by the growing dominance of foreign funds in the Indian markets during this period,” SMC noted.

Further, the report said that in FY11 the volume generated by options market is almost two times that of the volumes generated in the cash market and futures market put together.

In FY11, the trading turnover of cash market was at Rs 11,07,624 crore while, that of futures was Rs 98,52,666 crore and of options was Rs 193,95,710 crore. The study suggested that such phenomenal growth of options market can be attributed to the fact that “starting FY09, the brokerage and STT, in the options market are charged on the premium portion than on the entire open interest.”

Securities Transaction Tax (STT) is a tax being levied on all transactions done on the stock exchanges at rates prescribed by the Central Government from time to time.