How does F&O work in India?

are you sure?

i feel the premiums now are lower than fy21-22 for bank nifty

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Yup , I second that @viswaram .I have checked ATM straddle price, its actually significantly dropped around 20% ( compared with % of Spot and correlated with VIX). I feel either less people are buying or Options writers have increased( feels like the increase in option sellers). Might be she meant Increase in Option turnover?

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@nithin do you think that option volumes in index will continue to rise in future from the current level given the reduced leverage across other derivative segments?

Yes I meant total premium turnover

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@nithin

This is very helpful. Thank you.

One final question from my side - do you think a significant portion of new F&O traders would have churned out already in the last two years ? And if I consider unique demat account holders as a ceiling then it is unlikely that we see disruption in number of consistent F&O traders in the country going forward. Activity can however continue to depend on multiple aspects.

Is this correct ?

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Tough to say if option volumes will go up or not, since it is dependent on what happens with market direction and volatility. Which is impossible to call.

But one thing is for sure, given everything remains the way it is, option trading volumes will continue to be as high or higher as compared to equity intraday trading volumes. While most people getting started trading will still start as equity intraday traders, they will most likely shift to F&O given all the advantages.

Equity delivery volumes is a factor of market direction, again tough to call.

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Yep you are right.

Typically a person starting trading in the markets does by first investing or equity delivery. A few of them discover intraday trading stocks and the ability to make money being short. And given enough time, most intraday stock traders discover and start trading F&O.

Since in 2020, the influx of people getting started investing was so high, it led to many attempting F&O. So unless we have another period where there is a sudden rush of investors to the market, unlikely that F&O trading activity in terms of participation is going to pick up in the future. As a business we are bracing ourselves for a period where we think F&O trading activity will reduce. The logic is the same, if new investors aren’t adding at same speed and existing F&O traders are stopping, the F&O business slowly and steadily will reduce.

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There is a problem here. In my opinion, a large sample size is not necessarily a good sample size for this example.

Because F&O traders might be attracted to competitive brokerage charges, especially new entrants. Most of these new participants in the F&O segment are possibly with other brokerage houses that provide cheaper brokerage fees.

So if we take a sample of data from another broker with cheaper brokerage fees compared to Zerodha, the proportions of segment participation might vary significantly in their sample, and hence the conclusions put forward here might be subjective.

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@nithin you had some data analytics and order audit done for profitable traders last year right?

inference for this will clear out the statistics @Rishika_Garg is looking for. But i guess that is not publicly disclosable.

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If i pledge my mutual funds in zerodha there’s a charge of Rs. 30+gst is there any interest charged on the amount extended as margin?

@chethan_nahata No

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Hi Sir, I Have One Confusion Regarding Nomination,
I Have Heard That In Trading Account, Nomination Getting Compulsory Like In Demat…Is It So ?

Reason Behind Asking Is I Found Its Illogical As Trading Account Is Only For Trading, Not For Holding Of Any Shares, Bond…So Pls Update Us On This…

This then explains the unusualness of the thread :sweat_smile:. From what I remember, it took me a few weeks before I was able to tag users on the forum.
With the detailed & prompt responses, for a moment I thought this being a planted set of questions (which it is, technically😋).

But for what it’s worth, it’s so nice of you to be responding to all our queries here. I think tqna is one of the most important cog in the trust wheel that Zerodha has built over the years. You being so active here is such an assuring feeling.

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So pledging gives you interest free loan against your securities that you can only use to trade … and as long as you’re profitable it’ll work in your Favour??
Is there any repayment time or it is for infinite period?

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There is no finite time. Once you pledge, extra margin is available until you unpledge.

Its all explained in the article below and the links in them.

Margin can be used for intra-day trading in EQ, selling options, trading Futures etc because you just have to put up the security.
Its the P&L that you need to settle in their appropriate time.
Incase there is shortfall when you need to settle MTM/PnL and you dont have sufficient cash, then there is Margin penalty applicable.
Also, read about 50:50 cash equivalent collateral for overnight positions.

What is pledging, and how does it work? (zerodha.com)

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Hmm… no, there is no nomination for trading account. If there are any unutilized funds and no trades in the account, it gets transferred tot the bank account in 30 days. Whatever is the nomination in the bank account is what will work for those funds.

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Ah, wait, it shouldn’t take you weeks to tag users.

@Meher_Smaran, can you check if any settings on Discourse needs to be changed.

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Thank You Sir Ji For Responding On Nomination Query…
Last Point Want To Ask Is NSE Circular Mentioning Trading Account Too
For Reference, Attaching NSE Circular Image
So Requesting You To Guide Us Once Again…

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Ah yeah, @VenuMadhav corrected me and I was supposed to respond here. Ideally the nomination on trading account shouldn’t matter as the money anyways goes back to the bank account in 30 days. But yeah, in case before those 30 days if nominee reaches out, I guess we will in future have to settle funds to the nominee.

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That is a fantastic read. Well researched.

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