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1. What are Weekly Stock and Index Options ? 2. How many Weekly Options will be available for trading ? 3. How are Weekly Options different from Monthly Options ? 4. What will happen if expiry day is a Trading Holiday ? 5. What are the Similarities between Monthly and Weekly Options? 6. What are the benefits of Weekly Option Contracts? 7. What are the Risk Management measures taken at the Exchange level ? 8. Can we compare the premium quoted for Weekly Options with that of ? 1 What are Weekly Stock and Index Options ? Presently, the Stock and Index Options are offered for near, middle and far month contract series. In response to a demand from market participants for shorter maturity options, BSE has decided to offer Weekly Options series (normally Monday to Friday) in addition to the existing Monthly Options series. Initially contracts for 1 week and 2 weeks duration will be launched and thereafter, every week a fresh contract will be launched with a 2 weeks maturity. Hence normally, an investor will have, on any Monday, a choice of either a 1 week Option or 2 weeks Option. Exchange Traded Options based on a Stock or Index with shorter maturity of One or Two weeks are known as Weekly Options. 2 How many Weekly Options will be available for trading ? One week and Two week Options will be available for the market participants for trading. 3 How are Weekly Options different from Monthly Options ? Weekly Options differ mainly in terms of maturity period. Currently Monthly Options have maturity of 1 month, 2 months or 3 months. As 1 month options expire,another options series get generated. In case of Weekly Options, the maturity will be either 1 week or 2 weeks. Monthly Options Series will expire on last Thursday of every month. In case of Weekly Options, series will expire on Friday of every week.For Example if the Weekly Options are launched on September 13, 2004, commencement and expiration schedule will be as follows:
In the above table the weekly series which are generated on 1st week i.e. on 04/08/2008 will be expiring on 15/08/2008 and similarly the weekly series will be generated for 2nd, 3rd and 4th week. Thus effectively, on any Monday, say, on 11/08/2008, an investor will have a choice to invest in either a 1 week Option expiring on 15/08/2008 (residual time of the 2 week option opened on 04/08/2008) or the 2 week Option expiring on 22/08/2008, that has been opened on 11/08/2008. In case of weekly series generated on 3rd week i.e. 18/08/2008 the weekly option will be expiring on 29/08/2008, If the expiry day i.e. 29/08/2008 fall on a trading Holiday, then the expiry previous trading day i.e. 28/08/2008 is the last Thursday of the month (i.e. on the same day, the Monthly series is expiring) then the relevant Weekly series expiring on that day will not be generated. 4 What will happen if expiry day is a Trading If the expiry day of Weekly Options fall on a trading If that previous trading day is the last Thursday of the month (i.e. on the same day, the Monthly series is expiring) then the relevant Weekly series expiring on that day will not be generated. 5 What are the Similarities between Monthly and Weekly Options? The parameters viz. Underlying, Contract Multiplier, Tick size, Price Quotation, Trading Hours, Strike price Intervals of the Weekly Options will remain exactly the same as that of Monthly Options. 6 What are the benefits of Weekly Option Contracts?
7 What are the Risk Management measures taken at the Exchange level ? Since the introduction of Weekly Options is just the addition of new series and not a new product as such, the Risk Containment measures adopted for the Weekly Options would be similar to those applied for Monthly Options. 8 Can we compare the premium quoted for Weekly Options with that of Monthly Options ? The theoretical cost of an at-the-money call option with one month to expiry where the underlying price is Rs. 320 with annual volatility of 50% is Rs.19 and that of an at-the-money call option with 5 days to expiry is Rs.7.50. |
