NSE allows more strikes in index options in a session

A move that will enable investors to respond to sharp swings in equity indices, the National Stock Exchange (NSE) has increased the number of strikes in index options that can be traded in a particular session. The wider coverage of strikes has come as a relief to investors , who have been unable to trade in index options at times of sharp movements in the indices beyond the number of strikes available. As per new strikes, if the Nifty is trading between 2,001 and 4,000 points, the number of strikes available would be in the range of 6-1-6 compared to 4-1-4 format earlier. Further, the strike interval has been increased from 50 to 100 if the Nifty is above 2001. So, for instance, if the Nifty is trading at 2,800 pts, investors can avail index options with strikes up to 2,200 pts on the lower side and 3,400 pts on the higher side. In the earlier format, investors could avail these contracts with strikes only up to 2,600 pts and 3,000 pts. So, when the Nifty fell or rose 200 pts in a day, as seen in many instances in the last many months, investors had no other choice, but to trade in index futures, which is considered riskier. "It is a good move, as many of these strikes in 50s (such as 2850, 2750) were not highly liquid. But the timing could have been better, as most of the volatility seems to be over," said a derivatives strategist with a brokerage. The move is also expected to silence investor demand for a system that would allow traders to evoke new index options strikes intra-day. Derivative analysts, who track options data to gauge the build-up in the market, also faced problems due to limited coverage. If too many put contracts are traded at a certain level of the index, it is taken as an indicator that the index is likely to take that level where some huge build up is taking place.