SEBI Plans Longer-Tenure F&O Contracts to Curb Weekly Options
Why in the news
Worried that weekly options have become too speculative, SEBI is exploring longer-dated contracts.
Key facts
- Retail traders prefer weekly options to 1, 2 and 3-month contracts.
- SEBI wants to promote hedging and long-term investing, and will consult stakeholders on maturity profiles.
- Index options and other derivatives may get longer maturity to curb systemic risk.
About long-tenure derivatives
A derivative derives value from an asset such as a stock, commodity, bond or currency.
| Aspect | Weekly | Long-tenure |
|---|---|---|
| Expiry | 7 days | Monthly, quarterly or yearly |
| Use | Quick speculation | Hedging, long-horizon strategies |
| Market effect | More volatility | Steadier, trust and integrity |
Exam angle
- Regulator: SEBI; segment: F&O.
- Figure: about 90% retail losses.