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Retail investors prefer options trading over multibagger stocks in last 13 years: Here’s what trends indicate


Retail investors in India have shown greater interest in trading options than stocks over the past 13 years, with explosive growth in stock options in the derivatives market, recent data from google trends from 2009 to 2023 showed.

The huge boom in derivatives trading came after stock exchanges changed some options contracts to facilitate faster and cheaper bets as online retail trading platforms rose dramatically. Google trends 10 years, starting from October 2009 to December 2019, showed more interest in options trading, on average, than multibagger stocks.

Also read: Stock options trading in India is booming with excitement and anxiety

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Google trends show the interest in options trading over multibagger stocks over the past 14 years

Over 2019, interest in stock options rose significantly to 100 percent of average interest over time in the peak levels in 2023, which has fallen to 75 percent so far. Interest in multibagger stocks remains at 25 percent, according to Google trends.

What is options trading?

Options are a type of derivative contract that gives the buyers of the contracts (option holders) the right (but not the obligation) to buy or sell a security at a selected price at some point in the future. Buyers of options are charged an amount called a premium by the sellers for such a right.

Options are generally divided into ‘call’ and ‘put’ contracts. With a call option, the buyer of the contract buys the right to buy the underlying asset in the future at a predetermined price, known as the exercise price or strike price. With a put option, the buyer gets the right to sell the underlying asset in the future at the predetermined price.

Take experts on options trading

In its monthly derivative rollover report, domestic brokerage firm Religare Broking revealed Nifty closed at around 19,850 after witnessing selling activity based on volume weighted average price (VWAP) during the day.

Also read: Nifty November series outlook: 4 stocks where investors can park their money; is it yours?

In its report, Religare highlighted that at 95 percent, textiles, infrastructure, capital goods, and banking were the sectors that saw the highest moves in the October series. Whereas, at 90 percent, power, metals and media were the sectors where the lowest rollover was observed.

However, market experts and analysts have since maintained their cautious stance that options activity is more speculative than for hedging purposes. This could amplify any sharp fall in the market and act as a potential risk.

According to a report by Reuters news agency, Ashishkumar Chauhan, Managing Director and CEO of the National Stock Exchange of India (NSE) said in a message to investors: “Derivatives trading by retail investors should be avoided due to the high risk involved. . Be a long-term player.”

Outlook for November

Nifty November Futures Open Interest (OI) contract started with around 110 lakh compared to 97 lakh in October. October Bank Nifty futures saw Open Interest of around 23.5 lakh as compared to 22 lakh in October.

The November series saw mostly short rolls. As for the November future, an average price of around 19,400 will be the pivot for the month. Until Nifty trades below 19,400, the index is in bullish selling mode.

”We expect the Nifty to find strong support at 18,500-18,600 levels for the November series. On a spot basis the range for Nifty could be 19,200-18,600 for the first fortnight of the November series,” said Religare Broking.

The brokerage believes that the sectors that can outperform the index in the November series are fast moving consumer goods (FMCG) and pharmaceuticals.

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Updated: 18 November 2023, 08:07 PM IST

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