Equity derivate volumes have seen a consistent upward trend in the last couple of years. There have been trading sessions when the derivative volumes have outnumbered cash volumes by four times. In many developed markets the ratio is as high as 10. As Indian markets graduate to higher degrees of maturity, we shall see this ratio establish in Indian equity markets also.

The strong relation between underlying (cash) markets and derivatives market makes it inevitable for today's investor may it be retail or institutional to understand the dynamics of derivatives market. For this, one needs to have a constant update relating to equity derivative markets. With this idea in mind, we have initiated Derivative Alerts on Recent Expiry (DARE), which shall encompass important derivative indicators during the current expiry.

The current expiry started upon the completion of a very choppy October expiry (expiry date October 27, 2005). The expiry saw Nifty touch a low of 2338.6 and a high of 2669.2, thus registering a total move of 14% between the high and low. The current expiry (expiry date November 24, 2005) is the smallest expiry since January 2003 in terms of days. The number of trading days during the current expiry was 17, including the Muhurat day as compared to average trading days in any expiry, which is around 20-22 days. This leads to quick time decay in case of options bought and would work to the benefit of option writers.

The volumes of this expiry was average as compared to the previous expiries. On the cash side also the volumes were average. The average daily derivatives volumes were around three times the cash volumes. The segment breakup also saw the usual bent towards futures as compared to options. Futures volume comprise of around 86% of the equity derivatives volume as compared to 14% in options. The maximum share was that of stock futures at around 46% of the total volumes. Also in terms of contracts traded, the breakup was quite similar.

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