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BL Research Bureau

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Trading in long-dated options began from March 3, on both the premier bourses — the National Stock Exchange and the Bombay Stock Exchange. These products augment the range of options available on the two indices, from three to eleven.

In addition to the three monthly options, the exchanges are now offering three quarterly options and five semi-annual options. It will now be possible for investors to hedge their portfolios for as long as three years.

The introduction of these instruments will be welcomed by long-term high net worth investors and institutions, who need not be burdened with the cost of rolling over the options purchased to protect their portfolios from downside risks. These instruments will also benefit long-short funds and arbitrage funds.

The prime concern is likely to be liquidity in these instruments. As it is, options are less favoured when compared with futures in India.

Traders are likely to stay off these instruments due to higher premium.

Success of long-dated options would therefore depend upon the exchanges taking measures to increase their tradability by introducing market makers.

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