InvestorQ : I am looking to start trading in weekly Nifty options. Are there any specific advantages in weekly Nifty options?
Arya Nanda made post

I am looking to start trading in weekly Nifty options. Are there any specific advantages in weekly Nifty options?

Answer
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Deepa Salunkhe answered.
12 months ago


You may recollect that during the month of December 2018, SEBI granted the NSE permission to launch weekly options on the Nifty 50. It may be recollected that the weekly options on the Bank Nifty was launched in 2016 and this product has seen very good traction since then.

Here are some key advantages that you will have trading Nifty options

· If you look at the case of Bank Nifty, the weekly options were launched a couple of years back and have led to a sharp growth in the volumes on Bank Nifty derivatives. That would most likely get replicated in Nifty options also.

· Nifty options will open up the doors for arbitrage between weekly and monthly options. That is quite popular in these Bank Nifty options and could have a positive impact on the Nifty 50 option volumes too.

· There is another distinct advantage. Retail investors have been wary of selling options because of the high costs and the higher implicit risk due to the longer tenure. The introduction of weekly options should encourage retail investors to also sell Nifty options confidently.

· Nifty weekly will also offer a better hedge for short term triggers. Nifty 50 is a broad based index and covers a much broader portfolio. In the very short term, technical levels work much better making it easier for traders to determine the strike price on which to write these options.

· Even for those looking to buy weekly options, it is a cheaper way to hedge a set of stocks or beta hedge a more diversified portfolio. Weekly options will also make the task more granular. You can now hedge the Nifty 50 precisely for the week where you expect the event.

NSE has seen adequate success trading weekly Bank Nifty options and now that can be replicated for Nifty 50. It will also encourage more liquidity on the sell-side of options rather than just institutions and prop desks, and make the markets deeper and broader.