Originally Posted by Zerodha View Post
Nithin's view on SEBI's planned move of increasing F&O contract value - "Business will move from futures to options, which in turn could mean higher risk for investors"http://www.business-standard.com/art...2000902_1.html
Instead of increasing the margin they can increase the tick size from 5 paise to 25 paise or 50 paise . will have a similar effect and people will not mind that much...
If SEBI has real intention of helping ( ...and not saving) the retail/small traders. It should do away with the lot sizes and allow trading in F&O on
SINGLE SHARE basis as in equities.
Why do people trade or intend to trade in F&O segment ?
i) Cost of trading is less because of lower brokerage and taxes.
ii) Ease of liquidating position next day specially when trade goes against and STOP LOSS is hit some time may be targets too
- without fear of short delivery and NSE penalties.
iii) Ability to create short positions.
iv) Ofcourse the benefit of Leverage and this is not the only reason as far as I understand.
Biggest constraint of the trading in Lots is one has to take position in much larger quantities than the prudent money management would require, think from the prospects of a small trader who come in with small capital in the range of 1 lakhs something or even lesser, although 5 lakhs is not good enough. Money management says buy stocks worth 35 thousand for single trade but you get to buy a full lot worth close to 2 lakhs. Now you can not add to your position nor part book profits. So every trading principle goes for a toss. The trader is bound to fail.
Once the Lot size is made
1 unit, small traders - well you cannot call people buying/selling in F&O as retail investors, will be better placed to have their trades in good shape.
SHEKHAR
