Derivatives Readings: Beautiful lies, Options boom, Rupee futures
- DNA: ‘Derivatives business is full of beautiful lies’ (Interview with Satyajit Das)
“Hedging provides certainty —- of death.
Traders lie to sales people and to risk managers. Risk managers lie to the people who think they run the place. The people who run the place lie to shareholders and regulators. Investors and corporations generally lie to themselves about their understanding of derivatives and why they are using derivatives.
The same (sub-prime lending) business model was used in private equity loans, commercial property and infrastructure and it is all going to have to be unwound.”
- Economic Times: Options outdo futures for first time in 8 years
. . . options registered a total volume of Rs 3.12 lakh crore in August, which is higher than that of futures at Rs 3.01 lakh crore. Even the average daily turnover of options (Rs 15,605.09 crore) has moved ahead of futures (Rs 15,022.44 crore) for the first time ever in August.
“Day traders are left with no options but to trade in options since trading in any other category of products attracts too much STT for a transaction to be profitable.”
I would think that the recent flood of structured products also has helped (index) option liquidity.
- NSE: FX Market Tracker
Liquidity in the newly launched rupee (USDINR) futures at the NSE is still low, but it’s too early to draw conclusions. Interesting that 12-month futures are being traded above Rs 45.
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