The Impact of Maturity on Futures and Options with Reference to National Stock Exchange: An Exploratory Study

Abstract

National Stock Exchange was ranked foremost for trading of individual futures stocks in the year 2007. Since then trading of stock futures has witnessed a tremendous growth in India. Futures and options instruments have not only emerged for trading but also to minimize the risk associated with stock price fluctuations. Index, stock futures and options are based on monthly, bimonthly and quarterly contracts which expire on last Thursday of the month. The scope for studying futures and options has gained prominence with the introduction of weekly option contracts of Bank Nifty and Nifty Index Option at National Stock Exchange. It is believed that longer-dated options are more sensitive to the risk of intertemporal shift in any economic environment while shorter dated options are comparatively less risk sensitive. The factors stated above stress upon the need to explore the impact of maturity date on futures and options. Thus, the present study makes an attempt to present a detailed review of literature in this context. The present paper is of threefold. Firstly, it attempts to draw inferences based on literature review in relation to impact of maturity effect on derivatives market in National Stock Exchange. Secondly, it also makes an attempt to bring out the effect of monthly and weekly futures and options contracts. Towards the end, based on the analysis efforts had been made to draw a meaningful conclusion which may be helpful to academicians as well as investors and also may provide scope for further research.