BSE Managing Director and CEO Sundararaman Ramamurthy is spearheading an initiative to transform India's options market by encouraging traders to move beyond short-term, weekly expiries towards longer-dated contracts. In an exclusive interview, Ramamurthy detailed a three-year strategy focused on increasing participation in monthly and further-dated products, aiming to foster greater market stability and provide more effective hedging tools.
Ramamurthy argued that India's current options market, heavily dominated by weekly expiries, functions primarily as a bet on time decay (theta) rather than a comprehensive reflection of market dynamics. He believes that longer-term options, which incorporate delta, gamma, and vega plays, create a more complete market. He also addressed retail traders, explaining that longer-dated options are not simply four times the premium of weekly ones and can better capture directional views that may materialize beyond a single week.
The exchange has seen traction with its monthly Bankex expiry contracts and has introduced a Focused IT index product, which is showing promise as a hedging tool for the volatile technology sector. To drive adoption, BSE has conducted extensive educational sessions targeting dealers across various cities.
A significant challenge identified by Ramamurthy is the development of products that cater to institutional and foreign participants, whose portfolios often have only partial correlation to benchmark indices. He acknowledged the difficulty in designing products that serve hedging needs while also attracting speculative participation to ensure liquidity. Looking ahead, BSE plans to launch derivatives on the Focused Midcap and Sensex Next 30 indices, though timelines remain uncertain due to global volatility.