BSE Derivatives is introducing weekly options from Monday September 13th, 2004, on selected scrips and capital market benchmark SENSEX.

This is in order to cater to a demand for shorter maturity options, it has been decided to launch Weekly series (normally Monday to Friday) in addition to the existing series. Presently, the stock and index options are offered for near, middle and far contract month series.

With the introduction of weekly options, weekly series will always be available for trading on every Monday for participants with short-term view.

Product details & other specification:

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.

The example given below shows a typical commencement and expiration schedule of Weekly Options:

In the month of September 2004, One and Two week Options will commence from 13th September 2004, which will expire on 17th September 2004 and 24th September 2004 respectively. On 20th September 2004 another two-week maturity option will commence which will expire on 1st October 2004 so on and so forth.

With the introduction of Weekly Options, Weekly series will always be available for trading on every Monday for participants with short-term view.

If the expiry day of a Weekly Option falls on a trading Holiday, then the expiry (as per SEBI guidelines) will be on the previous trading day.

Product identification:
For the weekly series, the series code will include the date of expiry e.g. 17thSEP. This new series code format will incorporate the expiration date instead of contract month, as is used in the current system.

Risk Management:
Since the introduction of Weekly Stock and Index 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 Stock and Index Options.

Benefits of Weekly Stock Option Contracts:

• Weekly Options will command lower premium due to shorter maturity. Thus the Weekly Options will cost less than the Monthly Options.
• For similar capital outlay as Monthly Options, participants can take larger positions.
• Weekly Options will provide opportunity for Arbitrage between :
• ‘One week to maturity’ options and ‘two week to maturity’ options
• Weekly Options and Monthly Options.
• On account of low cost, the liquidity will improve, as more participants would come in.
• Weekly Options would lead to better price discovery and improvement in market depth.
• The market participants would be able to take a short-term view in the underlying also.
• Weekly Options would provide market participants short term insurance for their short-term portfolio.