Call Option Basics learn the basic Definition with Examples

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Marketopedia / Trading for professionals: Options trading / Call Option Basics learn the basic Definition with Examples

The options market dominates the derivatives business, particularly in India. I am not exaggerating if I claim that options account for close to 80% of derivatives traded, with the remaining 20% coming from the futures market. The options market has been established worldwide for some time now. 

Here’s a quick background: 

  • Custom options have been offered for sale over the counter since the 1920s (OTC). The majority of these options covered commodities.
  • In 1972, the Chicago Board Options Exchange (CBOE) began trading stock option contracts.
  • In the late 1970s, bond and currency options were initially made available. They were OTC deals. 
  • Exchange-traded options on currencies were first launched in 1982 by the Philadelphia Stock Exchange.
  • On the CME, interest rate option trading first began in 1985.

The world markets have undoubtedly changed significantly since the OTC period. But since the beginning, the Indian exchanges have backed the options market. 

The off-market ‘Badla’ system offered options. Consider the ‘badla system’ as a grey market for derivatives deals. The badla system is out of date and no longer in use.

An overview of the growth of the Indian derivative markets is provided below:

  • June 12, 2000- Launch of index futures 
  • June 4, 2001- Launch of index options 
  • July 2, 2001- Launch of stock options 
  • Nov 9, 2001- Launch of single stock futures

Despite the options market’s existence since 2001, substantial liquidity for Indian index options didn’t materialise until 2006. Back then, when I was trading options, the spreads were high and obtaining fills was a significant thing. 

The Ambani brothers formally split up in 2006, and their numerous businesses were listed as distinct corporations, unlocking the value for the shareholders.

This specific business event sparked interest in the Indian markets and produced significant liquidity. However, we still have a long way to go before we can compete with the international markets in terms of liquidity.


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