Day Trading Stocks & Futures

[Raj232]

Hi, guys, this news is about squaring off the position before exercising on the expiry. That's it. Whoever sells first, need to buy later before expiry. so close the position before expiry. that's is it. nothing big deal here. regardless of whether someone buys or sell first, he needs to close the position before expiry, else he obligated to pay cash or stocks.

See what brokers are doing... 4 days is in the picture .....

 

[headstrong007]

Hi, guys, this news is about squaring off the position before exercising on the expiry. That's it. Whoever sells first, need to buy later before expiry. so close the position before expiry. that's is it. nothing big deal here. regardless of whether someone buys or sell first, he needs to close the position before expiry, else he obligated to pay cash or stocks.

no way this is going to reduce the participant volume.

this is not new. It is now only we get matched to international markets.

In fact, personally, I congratulate the regulator for this move. Because it is what makes people understand the real meaning of derivative instruments. Neither futures nor options are standalone trading instruments. They are derived products from equities and indexes.

You have forgotten big volume options writers case, they usually go for the settlement. As they already hedge position with another way to minimize loss. They don't need to pay STT as sold first.
It's is also very difficult to square off big positions on OTM strikes in the last few weeks of expiry (they easily hedge the position with other strikes and leave it for settlement). You can see huge orders are already pending @0.05 paise on last day of settlement due to no match of bid-ask.

Take the simple example you ->option writer, sold big volume options for positional trade, after some day that strike of the option contract become illiquid, if there is no opposite party to the trade, how do you square off especially big volumes?
Maybe clearly it is going for a big winning position @settlement but you can't square it off (as there is no other side to match your big volume).

Option writers always try to minimize the risk, most of them would skip such stocks. The result will be wider bid-ask, option buyers (small traders) will not get the fair price with the absent of options writers (the other side).

Lets, watch and see the effect of those 46 stocks for another 1-2 year. I think most of them will be out of F&O list as volume will dry up slowly. SEBI already set min volume criteria and as a punishment such 46 low volume stock chosen for physical settlement. SEBI will review volumes on those 46 stocks every 6 months to take further action.

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SEBI wanted to experiment worst things on bad boys (the guinea pig) first.
A good positive experiment usually first tested on Good Boyes toppers and bad punishment to the bottom of the class.

Quote:-
To begin with, Sebi said that stocks which are currently in derivatives but fail to meet any of the enhanced criteria would be physically settled.
They will stop the experiment if most of the guinea pig dies.

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Just like previous STT Trap now there is more dangerous Physical Settlement Trap the beginners.
And this time this trap is not for only beginners but may hurt pro options writers too.

 

[headstrong007]

• A major drawback of physical settlement is that in comparison to cash settlement it is a very expensive method since the physical delivery will incur additional costs to maintain the same for a long period of time till it reaches the doorstep of the buyer.
• Additionally, physical settlement does not factor in futuristic change or market fluctuations.

**************

From the start of F&O NSE followed European Style options model(for price calculation) which are CASH SETTLED.
Now suddenly SEBI want to follow American Option model for settlement where option calculator is based on European Style.
Such mixing up European and American Style to just collect more Tax for Govt (by increasing cash volume using physical settlement), is clearly like Mr. Muhammad Bin Tughluq Style.

Our market will become a hybrid product too.. [Like the Jurassic World movie, a genetically-engineered dinosaur turns into a nightmare for its tourists ]
A volatile beta market will be a nightmare for retail investors, FII-DII soon.
Already blue-chips are moving 3-6% frequently both side. Not considering mid-cap, small-caps..

 

[headstrong007]

See what brokers are doing... 4 days is in the picture .....

View attachment 26685

Eventually, more broker will follow such measures to protect their interest.
This move will increase the volatility 1 week before the expiry. So double expiry dhamaka. And a clear failure from SEBI to curb volatility.

 

[headstrong007]

US markets is well developed. Stock Option Contracts are liquid there. There is no comparison to the illiquid stock option contract in India.
SEBI will test the bad result of the mischievous experiment soon.
Their main goal to increase STT for Govt by increasing the volume of the cash market.
Traders are not so stupid. They will move to Index Options.

I have, spend the whole night searching the all the topic advantage and disadvantages of Physical settlement vs Cash Settlement. I only see the bad effect as Indian Market is not developed yet like US. Even EU don't dared to copy US yet due to liquidity concern.

Finally, I am happy as a Bank Nifty trader, all such mischievous experiment by SEBI will bring more volatility to Bank Nifty.

 

[onequorauser]

Ultimately some positional trader will shift to next month contract or other contracts. Liquidity will dry up finally out of F&O list. That's is the SEBI's goal to cut the number of stocks from derivative section so that Cash Volume increases. Intraday traders who love trading such stocks will shift to intraday cash.
Positional future traders usually have good capital, they can manage the risk. But small options traders, trading with few thousand premiums will face maximum difficulty.
If the options volumes dry up, volatility will dry up. That's also SEBI's goal to curb the volatility by any mischievous ways.

When liquidity dries up volatility does not necessarily decrease. It can increase significantly

 

[nitingosavi]

 

[vikas2131]

When liquidity dries up volatility does not necessarily decrease. It can increase significantly

Exactly.. easier to swing around

 

[nitingosavi]

whats your take ?
BNF daily..... closing below 27040 .... till then i guess bullish

 

[vikas2131]

US markets is well developed. Stock Option Contracts are liquid there. There is no comparison to the illiquid stock option contract in India.
SEBI will test the bad result of the mischievous experiment soon.
Their main goal to increase STT for Govt by increasing the volume of the cash market.
Traders are not so stupid. They will move to Index Options.

I have, spend the whole night searching the all the topic advantage and disadvantages of Physical settlement vs Cash Settlement. I only see the bad effect as Indian Market is not developed yet like US. Even EU don't dared to copy US yet due to liquidity concern.

Finally, I am happy as a Bank Nifty trader, all such mischievous experiment by SEBI will bring more volatility to Bank Nifty.

Ultimately people will shift to handful of stocks in nifty and bank nifty...volume will dry up in other contracts if they do it to all stocks in F&O especially during big corrections in market..