BSE to offer ‘straddle and paired options’ contracts from today

Leading exchange BSE will offer from today new specialised contracts named 'straddle and paired options' in its currency derivatives segment. These new contracts will allow traders to take positions across two different option contracts -- call and put -- with same underlying asset (such as rupee-dollar exchange rate) and with the same expiry by entering a single order. The BSE had earlier made these specialised straddle and paired option contracts available in simulation environment for testing, while they were also tested in a market-wide mock trading conducted on Saturday.

The 'paired options' contracts are specialised two-legged contracts that allow a trader to take positions on two different option contracts belonging to the same product, at the same strike price and expiry. The paired option contract will comprise one Call leg and one Put leg having same strike price and expiry. Buying such contract implies taking a buy position in the individual Call option contract and sell position in the individual Put option contract with same strike price and expiry.

The 'straddle' contract is a specialised two-legged option contract and comprises two individual legs the first being the call option leg and the second being the put option leg, having same strike price and expiry. Buying a straddle contract implies taking a buy position in the individual Call option contract and buy position in the individual Put option contract with same strike price and expiry.

The BSE said both these contracts are available on current, near and far monthly as well as quarterly and half yearly option contracts. The paired option contracts are already available in the BSE's Equity Derivatives segment and now they will also be available in the Currency Derivatives segment. The straddle contracts will be offered in the Currency Derivatives segment to start with. 

Meanwhile, foreign investors continued their selling spree and pulled out more than Rs 2,300 crore from the stock markets in the first week of this month after US Fed chair Janet Yellen hinted at a rate hike.

The latest sell-off came after Foreign Portfolio Investors (FPIs) withdrew Rs 7,074 crore from the equities last month. Prior to that, overseas investors had made an investment of Rs 6,650 crore in the stock markets in October. As per the data compiled by the depositories, net outflow in equities stood at Rs 2,362 crore during December 1-4. However, FPIs invested a net amount of just Rs 2.81 crore in the debt markets during the same period. In prepared remarks, Yellen at an appearance before an economic group on Wednesday, said she is “looking forward” to first interest rate hike in nearly a decade, sparking worries that emerging markets may see capital flight. 

“Investors are sensing that the era of near-zero interest rates is coming to an end after the Fed chairperson expressed her confidence about the US economy,” Geojit BNP Paribas Financial Services Ltd Head-Fundamental Research Vinod Nair said. In addition, investors’ sentiments took a beating after a monthly PMI survey, which showed that services sector output stagnated in November after four straight months of expansion. The reading fell to 50.1 in November, from an eight-month high of 53.2 in October, as per the business survey conducted by Markit and Nikkei.