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Weekly Options

1. What are Weekly Stock and Index Options ?

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 Thursday falling two weeks prior to the last Thursday. In case of Weekly Options, series will expire on Thursday of every week. For Example:

Week Start Date Option Expiry Date
1 03/12/2010 2 week Option 16/12/2010
2 10/12/2010 2 week Option 23/12/2010
3 17/12/2010 2 week Option 30/12/2010
4 24/12/2010 2 week Option 206/01/2011

In the above table the weekly series which are generated on 1st week i.e. on 03/12/2010 will be expiring on 16/12/2010 and similarly the weekly series will be generated for 2nd, 3rd and 4th week. Thus effectively, on any Friday, say, on 10/12/2010, an investor will have a choice to invest in either a 1 week Option expiring on 16/12/2010 (residual time of the 2 week option opened on 03/12/2010) or the 2 week Option expiring on 23/12/2010, that has been opened on 10/12/2010.

In case of weekly series generated on 1st week i.e. 03/12/2010 the weekly option will be expiring on 16/12/2010, If the expiry day i.e. 16/12/2010 fall on Thursday falling two weeks prior to 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 Holiday ?

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

If the expiry day fall on Thursday falling two weeks prior to 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?
  • 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. This would result in better price discovery and improvement in market efficiency.


7. What are the Risk Management measures taken at the BSE 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 S&P BSE SENSEX call option with one month to expiry where the underlying is at 20000 with annual volatility of 50% is Rs.1189 and that of an at-the-money call option with 7 days to expiry is Rs.564.