Any Relationship between Equity Call/put option & Equity intraday/delivery trading of a stock?

Dear zerodha, Is there any relationship between equity call/put option with respect to equity intraday/delivery trading of a stock or vice versa ? If a any stock say, SBI goes down it is because of call/put option in the market ? ( One of the reason of top loser), Will Expiration of call/put of any derivative affects Equity Day Trading/Deliver Trading ? Please Explain step-wise Thanks and regards, nagesh

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Equity Derivative instruments are used as

  1. Hedging instruments for for hedging downside risk ,

  2. It is also used as arbitrage instruments to create synthetics which are used to create Risk neutral positions

  3. Also they are used by Speculators (Traders) to gain from their movemennts.

Equities are underlying instruments of Derivatives like Options and futures. So the relation is that when underlying (Equity) moves then the derivatives change values accordingly so Derivatives Values depend on Underlying Equities. Thats the Relation.

Example If SBI stock price is increasing that will lead to increase in price of SBI Futures and SBI calls and will lead to reduction in SBI Puts and opposite is the case when SBI stock price decreases.

I hope this clarifies

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@mandar
In reality most of the derivative stocks behave other way around. People get some cue from the derivative chain and change the prices of underlying stock in that direction.
What u are saying is almost theoretical, that F&O follow the underlyings value.
Yes it is true, but underlying value changes based on mass speculation and F&O contracts give idea to the mass to drag the underlying in that direction.
I think I am not confusing you! :slight_smile:

very nice explanation to understand the market.

Not at all Astroguru…
What u r trying to say i m fully aware, but if i start explaining algorithms to a first standard student who doesnt know basic of maths, He will get confused :slight_smile: So just cleared his basic funas :slight_smile:
Anyways To b frank what u said is the traders’s behaviour. They take positions relying on FIIs moves. That is, if FIIs have created shorts or longs in derivatives people will go short or long accordingly. That helps most of the times cause FIIs are big player and large market makers
But even other factors are there like news impacts, results, etc which will disturb the stand of FIIs. In that case Derivatives will anyways move theoritically disregarding the FIIs positions in derivative market :slight_smile: